Chapter 17 Assignment Back to Assignment Attempts: Keep the Highest: /0.2 4. Off-balance sheet activities Banks commonly engage in activities which generate income without requiring the bank to invest funds. These activities are known as of sheet activities because they are classified as asset or debt financing activities that are not on the company's balance sheet. Using the following table, select which off-balance sheet activity each scenario best represents. Scenario off-Balance Sheet Activity Miracle Solutions Company and Silo Company each want to exchange interest rate payments; however, both companies want to ensure the other's payments are guaranteed. As a result, they both pay Clover Financial Bank 3% to guarantee payments are made. Credit Default Swaps Forward Currency Contracts Interest Rate Swaps Loan Commitments Abraham Bank signs an agreement to purchase 3 million yen in one year from Engary Company for $0.0091 per yen and to sell 3 million yen in one year to Isolot Company for $0.01 per yen, with the profit being $0.0009 per yen. Standby Letters of Credit Lincoln Bank signs an agreement with Pixel Company to loan them $1 million, at a time specified by Pixel Company within the next six months, to finance their new facility, with an interest rate of 6.5 percent. Pixel Company pays Lincoln Bank $10,000 in exchange for locking in the interest rate today. Hoosier Bank sells Insurance to Mortgage Backed Security Investors to protect their MBSS against a potential default