QUESTION: 41

Which of the following statements best describes collateral?

Liquid assets pledged by one or both counterparties to the other to reduce credit risk
Deposits placed by a commercial bank with a central bank to fulfill reserve asset ratios
Any deposit placed by an institution with another institution of a lower credit rating
Any cross border payment of currency

Answer(s): A

In the absence of his normal dealer contact, a counterparty calls the back office and asks the clerk for his opinion about how long his money should be placed on deposit. What action should the back office clerk take?

He should give his opinion.
He should give his opinion and tell the counterparty that he is not qualified to do so.
He should tell the counterparty that he is not qualified to give an opinion and refer the counterparty to another dealer.
He should give his opinion and refer the counterparty to another dealer.

Answer(s): C

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