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    Question

    1  What is a special purpose vehicle (SPV) in project

    finance?
    A A type of debt security issued by the borrower Correct Answer Incorrect Answer
    B A company established specifically for the project to isolate risks and liabilities Correct Answer Incorrect Answer
    C A type of equity financing provided by the lender Correct Answer Incorrect Answer
    D A guarantee provided by the borrower to secure the loan Correct Answer Incorrect Answer

    Solution

    A special purpose vehicle (SPV) in project finance is a separate legal entity or company created solely for the purpose of a specific project. Its primary role is to isolate the risks and liabilities associated with that project from the sponsoring company or other ventures. SPVs are often used to ring-fence the assets and obligations of a project, making it easier to secure financing and manage risk. This structure helps protect the parent company and its other assets from the potential financial challenges of the project, and it provides a clear legal framework for the project's operations and financing.

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