24-74 Which of the Following Is NOT a Reason for the Credit

question 41

Multiple Choice

24-74 Which of the following is NOT a reason for the credit risk on a swap to be less than the credit risk on a loan?

• A)Swap contracts often extend beyond the maturity of normal loan contracts.
• B)Swap payments can be netted across more than on loan contract.
• C)Interest rate swaps involve interest,but not principal.
• D)Differences in credit quality between parties can be equalized through the use of standby letters of credit.
• E)All of the above are reasons for swaps to have less credit risk.

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Definitions:

Fat

A natural oily or greasy substance occurring in animal bodies, especially when deposited as a layer under the skin or around certain organs.

Calories

A unit of energy used to measure the amount of energy contained in food and drink and the energy expended during physical activity.

Gram

A metric unit of mass equal to one thousandth of a kilogram, commonly used to measure small quantities of substances.

Hemoglobin

A protein in red blood cells responsible for transporting oxygen from the lungs to the rest of the body.