FAS 133 Defines Effective Hedging as

question 13

Multiple Choice

FAS 133 defines effective hedging as

• A)a hedge with no basis risk
• B)a correctly priced hedge
• C)a perfect hedge
• D)a hedge that reduces 80 to 125 percent of the risk
• E)none of the above

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Definitions:

Secured Transaction

Any transaction in which the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest.

Collateral

Assets or property pledged as security for the repayment of a loan, subject to seizure on default.

Foreclosure

A proceeding in which a mortgagee either takes title to or forces the sale of the mortgagor’s property in satisfaction of a debt.

Repossess

The act of taking back possession of property by a seller or lender from the buyer or borrower, typically due to failure in payment.