AIWMI Exam CCRA-L2 Topic 2 Question 91 Discussion

Actual exam question for AIWMI's CCRA-L2 exam

Question #: 91
Topic #: 2

Which of the following is false in case of credit enhancements?

AIt reduces the default risk of the borrowing entity for the lender, thereby deteriorating the overall credit worthiness of the borrower

BCredit enhancement could be implicit or explicit

CCredit enhancement is a mechanism whereby external cash flows is extended by an entity which has a stringer credit profile, so that it benefits the fund raising entity

Show Suggested Answer

Suggested Answer: A

by Marti at Jun 28, 2024, 09:56 PM

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Jenifer

5 months ago

Wait, is this a trick question? I'm going to have to go with C. Getting that external support is the whole point of credit enhancement, isn't it?

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Leigha

5 months ago

Ah, the old credit enhancement conundrum. I think A is the false statement here. Gotta keep those borrowers looking good, you know?

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Jacki

3 months ago

A is the odd one out for sure. Credit enhancements are all about improving the borrower's credit worthiness.

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Jovita

3 months ago

Yeah, A doesn't make sense. Credit enhancements are supposed to help the borrower, not hurt them.

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Lisbeth

3 months ago

I agree, A is definitely false. We want to make sure the borrower looks good.

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Vallie

4 months ago

Absolutely, A is the odd one out here. It's important to maintain the borrower's reputation.

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Merissa

4 months ago

Yeah, credit enhancement is all about improving the credit worthiness of the borrower.

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Denae

4 months ago

I agree, A is definitely false. We want to make sure the borrower looks good.

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Rosendo

5 months ago

I believe the correct answer is A) as well, because credit enhancements are meant to reduce risk for lenders, not deteriorate credit worthiness

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Galen

5 months ago

Haha, this question is a real brainteaser! I'm going to go with B. Credit enhancement can definitely be implicit or explicit, that's a no-brainer.

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Bulah

4 months ago

I agree, A is definitely false. It helps the lender by reducing risk.

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Aide

4 months ago

I think A is false. Credit enhancements actually reduce default risk.

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Ira

5 months ago

Hmm, I'm not sure about this one. But I'm pretty confident that C is the right answer. Credit enhancement is all about getting that external cash flow support, right?

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Graciela

4 months ago

Yes, you're correct. Credit enhancement is indeed about getting external cash flow support.

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Charlena

4 months ago

C) Credit enhancement is a mechanism whereby external cash flows is extended by an entity which has a stringer credit profile, so that it benefits the fund raising entity

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