PASS PRO Questions
1.
According to FAS 133, assets with embedded derivatives should be split between the host
contract and the embedded derivative if:
I. the payoff of the derivative is not a function of the value of the host contract.
II. the embedded derivative meets the definition of a derivative on a stand-alone basis.
III. the fair market value for the hybrid contract would otherwise not be reported on the
balance sheet.
IV. the economic characteristics of the contract and embedded derivative are not "clearly and
closely related".
A. I and II
B. II and III
C. I, II and III
D. II, III, and IV
2.
Which of the following is NOT a recommendation of G-30?
A.
An activity related to derivatives should not be outsourced, given the nature of the risks
involved.
B.
Professionals with sufficient skills and appropriate experience should undertake derivatives
activity.
C.
One should account for derivatives transactions used to manage risks so as to achieve
consistent income recognition.
D. None of the above.
3.
FAS133 requires all US listed firms to:
A. mark to market all derivatives contracts.
B. use a VaR model for market risk management.
C.
declare the mark to market value of all derivatives contracts in the footnotes to the balance
sheet.
D.
apply accrual accounting only to the derivatives contracts that meet the hedge effectiveness
criterion.
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