Pure Credit Swaps Are Swaps by Which an FI Receives

question 35

Multiple Choice

Pure credit swaps are swaps by which an FI receives the:

• A)par value of the loan on default in return for paying a periodic swap fee
• B)current value of the loan on default in return for paying a periodic swap fee
• C)residual value of the loan on default in return for paying a periodic swap fee
• D)outstanding interest payments on the loan on default in return for paying a periodic swap fee

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Definitions:

Wholly Owned Subsidiary

A company whose entire share capital is owned by another company, making it fully controlled by the parent company.

Statement of Comprehensive Income

A financial statement that includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners, encompassing both net income and other comprehensive income.

Unamortized Premium

The portion of the bond premium that has not yet been expensed in the income statement through amortization.

Effective Interest Rate

The actual rate of interest earned or paid on a loan or investment, taking into account compounding.