24-70 a Total Return Credit Swap

question 87

Multiple Choice

24-70 A total return credit swap

• A)can allow an FI to maintain long-term customer lending relationships without bearing the full credit risk exposure from these relationships.
• B)involves exchanging an obligation to pay interest at a specified rate for payments representing the total return on a loan of a specified amount.
• C)can be important because credit risk is more likely to cause an FI to fail than either interest rate risk or FX risk.
• D)All of the above.
• E)Answers A and C only.

Understand the calculations involved in determining net float and the implications for cash management.

Understand methods to decrease a firm’s collection time.

Recognize the best cash management practices for firms with multiple offices and national customers.

Identify various motives for holding cash and the associated benefits.

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Definitions:

Stock Dividend

A dividend payment made in shares of the company's stock rather than cash.

Retained Earnings

The portion of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt.

Plant Expansion

The process of increasing the capacity or capabilities of existing facilities through additional space, equipment, or technology.

Dividend Declarations

A corporate action where a company announces the payment of dividends to its shareholders.