The Seller of Credit Default Swaps

question 24

Multiple Choice

The seller of credit default swaps

• A) agrees to exchange payments with another security if interest rates change.
• B) receives payments if the underlying security defaults.
• C) is obliged to make payments if the underlying security defaults.
• D) can only sell them to owners of the underlying security.

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Definitions:

Sales

The cumulative amount of money made by a business from selling its goods or services.

Average Collection Period

The average collection period is the average amount of time it takes for a business to receive payments owed by its customers for sales made on credit.

Accounts Receivable

Money owed to a business by its customers for goods or services delivered but not yet paid for.

Sales on Account

Transactions where goods or services are delivered with payment to be made at a later date, typically recorded as accounts receivable.