The Calculation of the Risk-Adjusted Asset Values of OBS Market

question 42

Multiple Choice

The calculation of the risk-adjusted asset values of OBS market contracts:

• A)nearly always equals zero because the exchange over which the contract initially traded assumes all of the risk
• B)requires multiplication of the credit equivalent amounts by the appropriate risk weights and includes all OBS transactions
• C)requires the calculation of a conversion factor to create credit equivalent amounts for all OBS transactions
• D)requires multiplication of the credit equivalent amounts by the appropriate risk weights and the calculation of a conversion factor to create credit equivalent amounts

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Definitions:

Service Charge

An additional fee charged for services rendered, often seen in the hospitality and banking industries.

Merchandise Sale

The process of selling goods that are purchased for resale, constituting a primary revenue source for retail businesses.

Allowance Method

A method in accounting for managing bad debts by predicting the accounts that cannot be collected at the end of every period.

Direct Write-off Method

An accounting method for recognizing bad debts where the specific uncollectible accounts receivable are written off as they are identified.