Which of the Following Statements Is True

question 35

Multiple Choice

Which of the following statements is true?

• A)In general, default risk on OTC contracts decreases with the time to maturity of the contract and the fluctuation of underlying prices, interest rates or exchange rates.
• B)In general, default risk on OTC contracts increases with the time to maturity of the contract and the fluctuation of underlying prices, interest rates or exchange rates.
• C)In general, default risk on OTC contracts is independent of the time to maturity of the contract and the fluctuation of underlying prices, interest rates or exchange rates.
• D)OTC contracts are generally free of default risk.

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Definitions:

Bonds Issued

The process of a corporation or government raising funds by selling bonds to investors.

At a Discount

Selling or buying something for less than its nominal or face value.

At a Premium

When a security is traded above its face value or nominal value.

Compounded Annually

Interest added to the principal sum of a deposit or loan once per year, resulting in interest on interest.