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      Question

      Which of the following describes the 'Special Purpose

      Vehicle' (SPV) in project finance?
      A A subsidiary that manages the parent company's daily retail operations. Correct Answer Incorrect Answer
      B A legal entity created for a specific project to isolate financial risk from the sponsors. Correct Answer Incorrect Answer
      C A government regulatory body that monitors infrastructure projects. Correct Answer Incorrect Answer
      D A type of heavy machinery used specifically in construction projects. Correct Answer Incorrect Answer
      E A joint venture between two competing banks to share administrative costs. Correct Answer Incorrect Answer

      Solution

      A Special Purpose Vehicle (SPV) in project finance is a distinct, legally independent subsidiary created specifically for a single, isolated project. Also known as a Special Purpose Entity (SPE), it holds the projectтАЩs assets, assumes its liabilities, and raises debt or equity entirely separate from the parent company.

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