Question

According to the FFIEC policy statement on securities lending, the MINIMUM initial amount of collateral required on domestic security loans is:

a. 100% of book value
b. 100% of market value
c. 102% of market value plus accrued interest
d. 105% of market value less accrued interest

Answer 1

The correct answer is option d. 105% of market value less accrued interest.

Step-by-step explanation:

The minimum initial amount of collateral required on domestic security loans, according to the FFIEC policy statement on securities lending, is 105% of market value less accrued interest.

This means that the lender requires the borrower to provide collateral that is worth at least 105% of the market value of the securities being borrowed, minus any accrued interest.

For example, if the market value of the securities is $100,000 and there is $1,000 in accrued interest, the minimum collateral required would be $104,000 (105% of $100,000 minus $1,000).