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DescriptionCollege of Administration and Finance Sciences
Assignment (2)
Deadline: Saturday 18/02/2023 @ 23:59
Course Name: Accounting of Financial
Student’s Name:
Course Code: ACCT 405
Student’s ID Number:
Semester: 1st
CRN: 22530
Academic Year: 1444 H
For Instructor’s Use only
Instructor’s Name: Mohammed Arshad Khan
Students’ Grade:
Level of Marks: High/Middle/Low
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
• Submissions without this cover page will NOT be accepted.
College of Administration and Finance Sciences
Assignment Question(s):
Q.1 Accounting for Securitization under SFAS No. 140 (2000) is a limited
attempt to describe complex transactions that are structured to yield
desired economic and accounting outcomes. This accounting raises three
issues for users of financial reports. State these three issues.
(3 Marks)
Q. 2 Mortgage banks are exposed to interest rate risk on their mortgagerelated asset through prepayment and discounting effects that are not entirely
distinct. Discuss the Prepayment and Discounting Effects of Mortgage Banks
in detail.
Q. 3 A bank to accept credit risk, it must expect to be paid either interest at
a sufficiently large premium above the risk-free rate or an actuarially fair fee.
The required credit risk premium or fee depends upon four determinants.
Explain these determinants in detail. (4 Marks)
College of Administration and Finance Sciences
Q. 4 SFAS No. 157 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
marketplace participants at the measurement date. Fair Value Accounting is
argued to be conceptually and practically preferable to Amortized Cost
Accounting for most financial instruments. But there are some arguments
that are against fair value accounting. Understanding these arguments are
important because they speak directly to the strength and weakness of fair
value accounting. You are required to discuss these arguments in detail.
(4 Marks)

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