How are derivatives reported on the balance sheet? Why?

Q: . What is the term structure of interest rates?

A: Answer: The term interest rate structure is the pattern of necessary returns, also referred to as…

Q: Explain accounting for derivatives.

A: Derivatives: Derivatives are some financial instruments which are meant for managing risk and…

Q: What are credit derivatives, and how do they operate?

A: Derivative instrument is the financila instrument which derive its value form the underlying asset.

Q: What interest rates should be used in determining the amount of interest to be capitalized? How…

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Q: Can you explain what is Principles of Interest Rate Structure? and how do you do it

A: We assume the question refers to the Term Structure of Interest Rates.  Term structure describes the…

Q: What is the difference between the stated interest rate and the market interest rate?

A: Bonds PayableBonds payable are referred to long-term debts of the business, issued to various…

Q: What are Debt Instruments?

A: Answer: Debt instrument is like a tool a company may use in capital raising. It allows the holders…

Q: What is The Relationship between Interest Rate Risk, Default Risk, and Risk Premiums

A: Risk refers to the chances of any changes in the prices of securities underlying with an investor…

Q: Describe the uses of and accounting for derivatives

A: Accounting for derivatives: It is a method of recording a derivative holding of a company’s balance…

Q: hat does the Revaluation reserves on the equity section of the balance sheet represent?

A: Solution:- Equity Equity is what the business owes to its owners. Equity is derived by deducting…

Q: summarizes the types of derivatives based on the NCREIF Index thatare available through Credit…

A: The question is based on the concept of real estate derivatives based on the National Council of…

Q: Why the financial instruments do often called derivatives?

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Q: How does the Liquidity Premium Theory influence the market interest rate?

A: Liquidity is the ability of a financial asset or security to convert into cash at market fair value.…

Q: How do derivatives hedge risk?

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Q: How do transaction costs affect the ability of forward and futures markets to arbitrage profits?

A: Both future and the forward contract involve the execution of the transaction at a future date at a…

Q: How do fundamental securities differ from derivatives

A: Fundamental securities and derivatives are actively traded in financial markets. The differences…

Q: Explain NCREIF Index Derivatives Issued by Credit Suisse?

A: The National Council of Real Estate Investment Fiduciaries Property Index (NCREIF)gives an exclusive…

Q: Some financial instruments are called derivatives. Why?

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Q: What are the components of an interest rate?

A: Interest rate refers to the net charges that a lender makes on the principal amount provided to the…

Q: What guidance does the SEC give for disclosures regarding accounting policies used for derivatives?

A: Securities and Exchange Commission (SEC):   It is a government body established to safeguard the…

Q: What is a Financial Derivative? What is the role of Derivatives in managing Financial Risk? Give an…

A: Financial derivative: Derivative is a contract between two parties whose value is based on the…

Q: Why are derivatives considered riskier than other financial instruments?

A: Financial Instruments:Financial instruments are the monetary contracts and assets that can be easily…

Q: What is the Relationship between Changes in Interest Rates, Investor Returns, and “Going-In”Cap…

A: The question is based on the concept of relation between change in interest rate and its impact on…

Q: How do money markets and capital markets differ? Identify the types of securities traded in money…

A: The Money market is a feature of the economy that offers short term investment option. A…

Q: What does the term structure of interest rates indicate?

A: Interest is an additional amount which is received over the investment amount during the period. It…

Q: What is the difference between book values and market values on the balance sheet?

A: Book Value means the carrying value of the assets as on balance sheet date. However, Market value…

Q: How are derivatives recorded?

A: Derivatives:   Derivatives are some financial instruments which are meant for managing risk and…

Q: How is the Equivalence Calculations made with Effective Interest Rates?

A: The formula for Effective annual rate is  Where, r - rate of return n - number of compounding.…

Q: Should market or book value be used for debt and equity?

A: Book value for debt and equity represents the recorded value of the debt and equity in the company's…

Q: Explain Extended Method for Interest Rate Swap Accounting.

A: Introduction Interest Rate Swap, an important type of derivatives, is the contract between 2 parties…

Q: type of liabilities: Trade and other payables  defination ?…

A: Current liabilities In accounting, current liabilities are often classified as all liabilities of…

Q: What are some types of credit derivatives?

A: A credit derivative is a type of financial contract where credit assets are kept as an underlying…

Q: Please define the “Interest Rate Parity Theorem” and explain the equation which describes it.

A: An interest rate parity theory is defined as an interest rate differential, which is between the two…

Q: How does the interest rate adjust?

A: Interest rate levels are based on two factors- supply and demand of credit: an increase in the…

Q: How are Effective Interest Rates calculated?

A: Effective interest rate is the interest earned on the investment or saving account.

Q: What are the forward rates of interest? How are they determined? What do they have to do with…

A: Forward rates of interest has basis as expectation of future interest rate that are implied in the…

Q: How is the purchase of held-to-maturity debt security at face value recorded?

A: Hold-to-maturity Debt:  These are the investment in debt securities, where the investor wishes to…

Q: Describe Disclosure of Derivatives and Risk.

A: As per FAS 161- Please see below : Disclosures to be made in the footnotes for derivatives- 1. An…

Q: Interest rates and bond prices have a direct relationship? true or false

A: Bonds are fixed income debt instruments used by companies to raise funds. The investors in return…