ExpertMedium2 marksMultiple Choice
ACCA · Question 9 · Business Finance
Section A
Crescent Real Estate is seeking to raise funds for a new commercial development in a manner compliant with Islamic finance principles. They wish to issue financial instruments that represent an ownership interest in the underlying real estate asset, rather than a debt obligation.
Which Islamic finance instrument is Crescent Real Estate most likely to issue?
Section A
Crescent Real Estate is seeking to raise funds for a new commercial development in a manner compliant with Islamic finance principles. They wish to issue financial instruments that represent an ownership interest in the underlying real estate asset, rather than a debt obligation.
Which Islamic finance instrument is Crescent Real Estate most likely to issue?
Answer options:
A.
Murabaha
B.
Sukuk
C.
Mudaraba
D.
Ijara
How to approach this question
Identify the Islamic equivalent of a bond that complies with Sharia law by representing ownership in an asset rather than an interest-bearing debt.
Full Answer
B.Sukuk✓ Correct
Sukuk are the Islamic equivalent of bonds. However, because Sharia law prohibits the charging or paying of interest (Riba), Sukuk are structured so that the investor holds a partial ownership interest in the underlying asset and receives a share of the profits/rent generated by that asset, rather than fixed interest.
Common mistakes
Confusing Sukuk with Murabaha (trade credit) or Mudaraba (equity partnership).
Practice the full ACCA FM — Financial Management Practice Exam 1
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