GF510_Unit 1 Assignment 1_Andrews, Tradawnya

Question 1e A bank finds that its assets are not matched with its liabilities. It is taking floating-rate deposits and making fixed-rate loans. How can swaps be used to offset the risk?

Ee 54.

QUESTION 1 The following is true for banks managing interest rate risk:     In refinancing risk, banks gain if interest rates decrease       In refinancing risk, banks gain if interest rates increase       In reinvestment risk, banks lose if interest rate increase       In reinvestment risk, banks gain if interest rate decrease

Item 33 of 50 The principal advantage of using commercial paper as a short-term financing instrument is that it Select the correct response: Offers security, i.e., collateral, to the lender. Can be purchased without commission costs. Is readily available to almost all companies. Is usually cheaper than a commercial bank loan.

QUESTION 5 What is the key problem associated with the Fed's lender-of-last-resort role?   A. May generate moral hazard problems if banks believe they will be bailed out   B. May generate adverse selection problems   C. May generate moral hazard problems if individual firms believe they will be bailed out   D. May generate free-rider problems

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Q 22   Which of the following is a debt security whose payments originate from other loans, such as credit card debt, auto loans, and home equity loans?   Multiple Choice   junk bonds   credit quality securities   asset-backed securities   debentures

Question 41 Collateralised debt obligations (CDOs) were responsible for significant damage and disruption to global financial markets as: the securities' cash flow was based on cash flows from other financial securities and not the cash flows from real assets investors accepted the recommendations of CDO arrangers and rating agencies O the CDOs' cash flows were based on cash flows from real assets and not from other financial securities O many investors were unable to assess the fairness of prices

Moral hazard caused by Deposit Insurance Schemes refers to: Question 2Answer a. The placing of funds from immoral activities into the banking system. b. The loss exposure faced by an insurer when the provision of insurance encourages the insured to take less risks. c. The loss exposure faced by an insurer when the provision of insurance encourages the insured to take more risks. d. The excess profits earned by banks from insured deposits.

question 58 Short-term commercial bank loans can be used to finance inventory and accounts receivable.  TRUE OR FALSE

13-when the least desirable credit risks are the ones most likely to seek loans, lenders are are subject to the . Please select one; a) moral hazard problem b) adverse selection problem c) noncollateralized risk problem d) free-rider problem e) principal agent problem

Sovereign risk refers to the risk that repayments from: Question 11Answer a. local borrowers are interrupted because of interference from foreign governments. b. foreign borrowers are interrupted because of interference from local governments. c. foreign borrowers are interrupted because of interference from foreign governments. d. None of the listed options are correct.

QUESTION 7 Which type of short-term loan is secured with Treasury bills as collateral?   A. Federal funds   B. Repurchase agreements   C. Commercial paper   D. Certificates of deposit

Question 6 of 18 Which of the following is not a characteristic of receivables? Select the correct response: OThe holder has a demonstrated positive intention and ability to hold them to maturity. O The holder can recover substantially all of its investment (unless there has been credit deterioration). O They have fixed or determinable payments. They are not quoted in an active market. ( Previous