In Its Simplest Form,a Credit Default Swap Provides

question 73

Multiple Choice

In its simplest form,a credit default swap provides

• A) insurance against default in the principle and interest payments of a credit instrument.
• B) an alternative method for bond issuers to pay principle and interest payments via a swap.
• C) bond investors with a method to swap interest payments for principle payments during a "credit event."
• D) the government with a guarantee that certain bond issues will not run into credit problems.

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Definitions:

Marginal Cost

The cost added by producing one additional unit of a product or service, a crucial concept in economic decision-making and pricing strategies.

Perfectly Competitive

A market structure where many firms offer a homogeneous product, there are no barriers to entry or exit, and all firms are price takers.

Oligopolistic

Oligopolistic refers to a market structure characterized by a small number of large firms dominating the market, leading to limited competition.

Marginal Cost

The extra expense derived from the production of an additional unit of a product or service.