Covered Bonds

question 67

Multiple Choice

Covered bonds:

• A)were introduced following the GFC to ease liquidity pressures on the bank's balance sheet
• B)are issued by a bank, backed by a pool of assets, which remain on the balance sheet of the issuing bank
• C)are issued by a bank, backed by a pool of assets, which are off-balance-sheet items of the issuing bank
• D)are issued by the Reserve Bank of Australia to FIs with liquidity problems

Understand the accounting treatment and classification of investments on the cash flow statement.

Recognize the criteria for the use of consolidation accounting and when to apply the equity method.

Calculate the carrying amount of investments using the equity method.

Evaluate the impact of investment transactions and adjustments on financial statements.

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Definitions:

Outstanding Balance

It signifies the total amount still owed on a loan or credit line, factoring in both principal and interest, at a certain point in time.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets over a specific period.

Per Annum

Annually or by the year; often used to specify interest rates, salaries, and other financial measurements that occur on a yearly basis.

Accumulate

In investment terms, to gradually gather or acquire an increased quantity of a particular asset or security over time.