oh how i've forgotten all about SPE's...

Which of the following statements about special purpose entities (SPE) are correct or incorrect? Statement #1: The sponsor usually maintains the decision-making power and voting control over the SPE. Statement #2: The equity owners of an SPE usually receive a rate of return that is tied to the performance of the SPE. A) Both are correct. B) Both are incorrect. C) Only one is correct.

A - False! B True C is answer.

Is this a VIE? C?

If I’m right, I’m going to get 90% on this exam and I should quit studying… yeah… right

TRUE FALSE C?

C. #1 is a VIE.

swaptiongamma Wrote: ------------------------------------------------------- > TRUE > FALSE > C? same as him/her. Is sponsor beneficiary?

Your answer: C was incorrect. The correct answer was B) Both are incorrect. Both statements are incorrect. The sponsor does not usually have voting control over the SPE; the activities of an SPE are specifically detailed in governing documents created at the origination of the SPE. The structure of the SPE transfers the risks and rewards from the equity owners to the variable interest owners. In return, the equity owners usually receive a fixed rate of return.

round 2- Which of the following statements about variable interest entities (VIE) are correct or incorrect? Statement #1 One potential benefit of a VIE is a lower cost of capital since the assets and liabilities of the VIE are isolated in the event the sponsor experiences financial difficulties. Statement #2 The organizational form of a VIE must be either a partnership or a joint venture and it is necessary for the VIE to have separate management and employees. A) Only one is correct. B) Both are correct. C) Both are incorrect.

  1. True 2. False A (gulp)

C for the first question A for the second question

A true and false - the word MUST should not be there.

Good redeemer- i just crushed a SS5 quick qbank review except for these SPE/VIE q’s. need to do a quickie review of them so I don’t miss the easy point on the test. Your answer: C was incorrect. The correct answer was A) Only one is correct. Statement #1 is a correct statement. A lower cost of capital is a potential benefit of forming a VIE. Statement #2 is an incorrect statement. The organizational form can be a corporation, partnership, joint venture or trust. It is not necessary for the VIE to have separate management and employees.

That first question kicked me in the knuts, I thought I had SPE/VIE down cold.

"The equity owners of an SPE usually receive a rate of return that is tied to the performance of the SPE. " cannot be true because the sponsor of an SPE usually make up the return shortfall for equity owners (would be true if they said it was a QSPE)

B and A. I got both right. Both the questions were tricky. But I think these kind of question’s won’t come on the exam, we might just be wasting our time with these standalone question format. CFAI is gonna give us some real case study or example and ask us based on that vignette, so… i am not sure how good I feel about getting these 2 right. Its not level I after all.