Securities

Question 1

What are the three classifications of securities

Answer 1

Held to Maturity (HTM)
Trading Securities
Available for Sale (AFS)

Question 2

What are Held-to-Maturity securities

Answer 2

Securities you plan on holding until maturity. Bonds

Valued at PV | Discounted future cash flows

Question 3

What are trading securities

Answer 3

Securities you plan to sell in the short term. Recognize unrealized gain/loss through income statement

Question 4

What are available-for-sale securities

Answer 4

Securities you don’t plan to sell in the short term or hold until maturity.

Recognize gain/loss to OCI

Question 5

What happens when you transfer AFS securities to Trading and vice versa

Answer 5

Trading -> AFS new gain/losses go into OCI and gains/losses beforehand still flow through I/S

AFS -> Trading recognize all unrealized gains/losses in I/S