________________ Are the Primary Risks Associated with Activity in the Bond

question 49

Multiple Choice

________________ are the primary risks associated with activity in the bond market.

• A)Bankruptcy and the variability of exchange rates
• B)Bankruptcy and the variability in their market value
• C)Variability in their market value and the risk of bank failure
• D)Bankruptcy and the risk of bank failure

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Definitions:

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow on a collateralized basis over a similar term the funds necessary to purchase an asset.

Capital Lease

A lease agreement that grants a lessee control over an asset for a substantial portion of its useful life, and is recorded as an asset and liability on the balance sheet.

Lease Rate

The amount charged under a lease agreement for the use of an asset, often expressed as a payment amount per period.

Sales-Type Capital Lease

A leasing agreement in which the lessor recognizes immediate sales revenue and profit, reflecting the transaction as a sale rather than a rental.