ERM Exam 3 Ch 7 Questions & Answers 2024/2025
When the United States dollar appreciates against the euro,
a)One dollar buys more euros than it had previously.
b)Swiss banks are forced to hedge currencies to make up the difference.
c)Imports rise because of demand for U.S. dollars.
d)There ...
When the United States dollar appreciates against the euro,
a)One dollar buys more euros than it had previously.
b)Swiss banks are forced to hedge currencies to make up the difference.
c)Imports rise because of demand for U.S. dollars.
d)There is no effect on importing companies who use U.S. banks. - ANSWERSa)One dollar buys more
euros than it had previously.
On a balance sheet, what is a term for the value calculated by subtracting liabilities from assets?
a)Owners' equity
b)Book value
c)Surplus
d)All of the above
e)None of the above - ANSWERSd)All of the above
The activity of buying a bundle of mortgage loans and then selling to investors an interest in those
income-producing assets is
a)Prohibited if subprime home loans are involved.
b)Transacted with a commercial mortgage broker.
c)Required under statutory accounting as a means to mitigate financial risk.
d)Performed by an intermediary known as a special purpose vehicle. - ANSWERSd)Performed by an
intermediary known as a special purpose vehicle.
Which one of the following statements is true about an organization's balance sheet?
Select one:
A. Total liabilities minus owners' equity equals total assets on the balance sheet.
, B. The balance sheet shows the financial position of a business on a specific date.
C. Total assets must equal total liabilities on the balance sheet.
D. The balance sheet summarizes revenues and expenses for an accounting period. - ANSWERSB. The
balance sheet shows the financial position of a business on a specific date.
Which one of the following statements about the balance sheet is correct?
Select one:
A. The balance sheet contains important financial information about net worth and assets, both which
indicate the source of an organization's funding.
B. Change in asset and liability valuation from historical cost to fair value has no effect on the value of
shareholders' equity.
C. The balance sheet must always balance, but an exception is that the balance sheet will not balance if
net worth is a negative number.
D. Net worth is positive whenever the value of assets exceeds the value of liabilities and negative if the
value of liabilities exceeds the value of assets. - ANSWERSD. Net worth is positive whenever the value of
assets exceeds the value of liabilities and negative if the value of liabilities exceeds the value of assets.
The basic accounting equation on which the balance sheet is structured is
Select one:
A. Assets = Liabilities + Net Worth
B. Liabilities = Assets + Net Worth
C. Net Worth = Liabilities + Assets
D. Assets = Liabilities - Net Worth - ANSWERSA. Assets = Liabilities + Net Worth
A major benefit of involving a special purpose vehicle (SPV) in a securitization transaction is that
investors can decide whether to invest in the securities based on the
Select one:
A. Risk presented by the income-producing assets held as collateral by the SPV.
B. Organization's balance sheets.
C. Number of borrowers involved and their individual risk.
D. Overall credit risk of the organization. - ANSWERSA. Risk presented by the income-producing assets
held as collateral by the SPV.
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