All of the Following Statements Accurately Describe Special Purpose Entities

question 35

Multiple Choice

All of the following statements accurately describe Special Purpose Entities (SPEs) except for:

• A) SPEs are corporations, trust or partnerships created for a single specified purpose.
• B) SPEs usually have no substantive operations and are used for financing operations.
• C) SPEs are used for asset securitization, risk sharing and taking advantage of tax statues.
• D) A variable interest entity (VIE) is a type of SPE with a limited number of equity investors.

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Definitions:

Compounded Monthly

Compounded monthly refers to the process where interest is added to the principal sum of a loan or deposit so that the added interest also earns interest from then on.

Compounded Monthly

A method where interest is added to the principal every month, allowing the interest to earn interest in subsequent months.

Compounded Semi-Annually

The process of calculating interest where the interest is added to the principal sum of a loan or deposit twice a year.

Mutual Fund

A type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is managed by an investment company with the capital pooled from many investors.