AIWMI Exam CCRA-L2 Topic 6 Question 93 Discussion

Actual exam question for AIWMI's CCRA-L2 exam

Question #: 93
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 Fredric at Jul 14, 2024, 11:02 AM

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Leila

4 months ago

I'm just here for the free snacks. Whoever gets this right deserves a raise!

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Latia

4 months ago

B) Credit enhancement could be implicit or explicit

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Aja

4 months ago

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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Stefania

4 months ago

This question is a real head-scratcher! Maybe the answer is 'all of the above' and the exam is just trying to trick us.

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Larae

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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Argelia

4 months ago

B) Credit enhancement could be implicit or explicit

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Martina

4 months ago

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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Jamal

5 months ago

Hold on, I'm pretty sure option C is false. Doesn't credit enhancement involve the borrowing entity getting external support, not the other way around?

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Jenelle

5 months ago

I'm not sure, but I think option B is the one that's false. Credit enhancement is always explicit, right?

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Sylvia

4 months ago

I agree with Sylvia, option C is definitely not false. It's option A that is incorrect.

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Lizette

4 months ago

I disagree, I believe option C is the false statement. Credit enhancements can be implicit or explicit.

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Vincenza

4 months ago

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

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Cory

4 months ago

I agree with Cory. Option C is definitely not false. Credit enhancements can involve external cash flows.

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Valene

5 months ago

I disagree. I believe option C is the false statement. Credit enhancements can be implicit or explicit.

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Daren

5 months ago

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

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Yuriko

5 months ago

I believe the false statement is A) because credit enhancements actually improve the credit worthiness of the borrower

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Bettyann

5 months ago

I agree with Lavera, A) seems incorrect

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Lavera

5 months ago

I think the false statement is A)

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Tabetha

5 months ago

Hmm, I think option A is the correct answer. Credit enhancement is supposed to improve the creditworthiness of the borrowing entity, not deteriorate it.

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Shaun

5 months ago

Yeah, credit enhancement is meant to reduce default risk, not increase it.

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Cristy

5 months ago

I agree, option A seems to be the correct answer.

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