AIWMI Exam CCRA-L2 Topic 6 Question 84 Discussion

Actual exam question for AIWMI's CCRA-L2 exam

Question #: 84
Topic #: 6

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 Georgene at Apr 13, 2024, 01:03 PM

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Janet

6 months ago

Well, credit enhancement is meant to strengthen the credit profile of the borrower, so C) makes sense

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Elvis

6 months ago

But why do you think the answer is C)?

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Kattie

6 months ago

I'm not sure, but I think it could be B)

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Janet

6 months ago

Actually, I believe the answer is C)

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Elvis

6 months ago

I think the answer is A)

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Florinda

6 months ago

Yes, that makes sense. It's important to understand the purpose and impact of credit enhancements in financial transactions.

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Ettie

7 months ago

So, the correct answer is A) that credit enhancements do not deteriorate the overall credit worthiness of the borrower.

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Diane

7 months ago

Actually, credit enhancements can be provided by entities with stronger credit profiles to help benefit the fund raising entity.

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Josephine

7 months ago

I believe option C) is false, as credit enhancements are not necessarily provided by entities with stronger credit profiles.

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Fernanda

7 months ago

I agree, credit enhancements actually help improve the credit worthiness of the borrower by reducing default risk.

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Edda

7 months ago

I think the false statement is option A) that credit enhancements deteriorate the overall credit worthiness of the borrower.

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Leslie

8 months ago

Great, I think we've got it figured out. *chuckles* Although, I have to say, these exam questions can really be a minefield sometimes.

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Wilda

8 months ago

Yep, that's my understanding as well. Option A is the odd one out here.

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Virgie

8 months ago

Haha, no kidding! It's like they're trying to trick us. But hey, at least we're all in this together, right?

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Stefania

7 months ago

Yeah, that doesn't make sense. So, the correct statement is B) Credit enhancement could be implicit or explicit

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Kenneth

7 months ago

I think the false statement is A) It reduces the default risk of the borrowing entity for the lender, thereby deteriorating the overall credit worthiness of the borrower

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