CFA Practice Question

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CFA Practice Question

For the purpose of external credit enhancement, an investor would most likely pick a ______ to counter third-party risk.

A. cash collateral account
B. letter of credit issued by a bank
C. bank guarantee
Correct Answer: A

Because a CCA is an actual deposit of cash, a downgrade of the CCA provider would not result in a similar downgrade of the security.

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User Comment
Inaganti6 Cash > promise of cash
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