Which of the Following Is Not a Similarity Among Interest

question 16

Multiple Choice

Which of the following is not a similarity among interest rate swaps, financial futures and FRAs.

• A) Each contract allows managers to alter a bank's interest rate risk exposure.
• B) None of the contracts require much of an initial cash commitment.
• C) Each contract provides for cash receipts or payments depending on how interest rates move.
• D) Parties negotiate the notional principal amounts for each contract.
• E) All of the above are similarities among interest rate swaps, financial futures and FRAs.

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Definitions:

Acquisition Differential

The difference between the cost of acquiring an entity and the fair value of its identifiable net assets.

Voting Shares

Shares that give the stockholder the right to vote on matters of corporate policy making and the election of the board of directors.

Impairment Loss

A charge recognized when the carrying amount of an asset exceeds its recoverable amount, indicating a permanent reduction in the valuation of a company's asset.

Consolidated Balance Sheet

A financial statement showing the total assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as if they were a single entity.