15-79 Which of the Following Is True of Brady Bonds

question 70

Multiple Choice

15-79 Which of the following is true of Brady bonds?

• A)They are uncollateralized.
• B)They have a shorter maturity and a higher than promised coupon (yield)than the original sovereign loans.
• C)The benefit from Brady bond is the "saving" from lower interest spreads required on such bonds.
• D)Their value partly reflects the value of collateral underlying the principal and/or interest on the issue.
• E)Their value fully reflects the credit risk rating of the country issuing the bonds.

---

Definitions:

Fair Value

The price at which an asset would be bought or sold in an orderly transaction between market participants at the measurement date.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price, not their current market value.

Economic Entity Assumption

The economic entity assumption is an accounting principle that treats a company as a separate entity from its owners for reporting purposes.

Comparability

A qualitative characteristic of financial information that allows stakeholders to identify similarities and differences between two or more sets of economic facts.