Which of the Following Is Not a Reason for the Credit

question 68

Multiple Choice

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 contract.
• C)Interest rate swaps involve interest, but not principal.
• D)Swap contracts often extend beyond the maturity of normal loan contracts, swap payments can be netted across more than on contract and interest rate swaps involve interest, but not principal.

---

Definitions:

Economic Life

The expected period of time during which an asset remains useful to the owner for generating income or other benefits.

Investment Dollars

The amount of money committed to investments with the expectation of generating a future return.

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money.

Annual Cost Savings

The reduction in total costs achieved on an annual basis through efficiency improvements, cost-cutting measures, or operational changes.