Which One of the Following Statements Relating to Scenario Analysis

question 39

Multiple Choice

Which one of the following statements relating to scenario analysis is incorrect?

• A)Going-concern scenario relates to 'normal' behaviour of cash flows in the ordinary course of business.
• B)Going-concern scenario relates to 'abnormal' behaviour of cash flows in the ordinary course of business.
• C)Name crisis scenario relates to the FI operating in adverse operating conditions and can fund operations for five days.
• D)All of the listed options are correct.

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Straight Bond Value

The value of a bond that pays a fixed interest rate (coupon rate) and does not have any embedded options such as convertibility or callability.

Convertible Bond

A bond that offers the option to be exchanged for a specific quantity of the issuing company's stock at chosen intervals throughout its tenure, generally at the choice of the person holding the bond.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a certain period.