A junk bond rating is BAA BBB and lower BB none of the above

Q: Moral hazard or its reduction explain the following except: O A. Collateral requirements for loans.…

A: A moral hazard is the concept that a party who is protected from risk in some way will behave…

Q: Which innovation has caused the most trouble for financial institutions that issue residential…

A: Answer: The correct answer is option A. Securitization.

Q: rates rise, bor

A: The correct option is shown as,

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing    a. Repricing…

A: Repricing risk is associated with the the rate of changes in the interest rate charged. It occurs…

Q: When a firm gets riskier what will happen to its bonds Multiple Choice   the stated interest rate…

A: Bonds are the debt obligations of a business on which it requires to pay regular interest to the…

Q: Collateral does not reduce the risk of a loan per se, because A. it is not part of the loan…

A: Collateral = It refers to asset, being pledged by bank against the loan given to its customer in…

Q: Banks can hedge the credit risk of their mortgage loans by buying credit default swaps. (Think about…

A: The risk or uncertainty that is present in an investment transaction that the investee will not…

Q: Given a decrease in interest rates, Mortgage-Backed Securities (MBS) prepayments will be slower…

A: Mortgage-backed security refers to securitized bonds backed by different types of mortgages, and the…

Q: What is MOST TRUE of DEFAULT RISK on a mortgage loan? It is always lower with lower interest rates.…

A: Default risk is the risk that a lender assumes when a borrower fails to make mandatory debt…

Q: a bank that makes most of its long term loans at fixed interest rates is reducing ceedit risk and…

A: The banks can make a loan with both of the terms i.e short term loan or long term loans.

Q: Which of the following best describes interest rate risk? The risk that credit ratings will change,…

A: The effect of interest rates refers to the impact that changes in the cost of borrowing money have…

Q: Which one is not an incentive for a bank to securitize its mortgage loans? Reduce insurance premium…

A: The objective of the question is to identify which among the given options is not a reason for a…

Q: hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance…

A: The objective of the question is to identify which among the given options is not a reason for a…

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk O…

A: Since, more than one different questions are posted, answer for the first question is only provided…

Q: Credit risk is a factor for commercial mortgage-backed securities because they are backed by…

A: Option A. Non Recourse Commercial Mortgage backed securities are securities whose payoff depends on…

Q: What is MOST TRUE of DEFAULT RISK on a mortgage loan? Group of answer choices It is always lower…

A: Mortgage loans are secured loan i.e., borrower raise funds for various purposes by promising…

Q: Which of the following decreases the likelihood of bank failures by keeping banks from making risky…

A: Option d is correct.

Q: heir loans in one industry so that they can specialize on that industry and reduce the credit risk…

A: Credit risk means risk of default in payment obligation by borrower.

Q: Banks use gap analysis to measure interest rate risk in their balance sheets. If firm XYZ is said to…

A: A positive gap is a situation where the bank’s rate-sensitive assets exceed the rate-sensitive…

Q: Why is it that oftentimes banks refuse to lend to many borrowers even though they offer high…

A: Analysis of the given option: i) To reduce the exposure to diversification risk Remark-By…

Q: Which of the following statement is (are) TRUE of collateralized loan obligation (CLO)? A: A CLO…

A: In this question, we are required to determine the statements which are true.

Q: A bank wants to implement a loan pricing model and has to look at several variables to consider.…

A: A loan pricing model is a financial tool or framework used by banks and financial institutions to…

Q: the financial institution do to lower these risks

A: The main risk is that interest rates will rise. Therefore, banks have to pay  higher interest rates…

Q: What is not an advantage of a Treasury (T) Note?   Select one: a.   Extremely liquid security.…

A: A Treasury note refers to the marketable debt security of the U.S. government issued with a fixed…

Q: Which of the following is FALSE regarding ARM loans? O Lenders only originate ARMS if the expected…

A: Several statements have been made about ARM. We have to find the one that is FALSE.

Liquidity Risk Exposure

Answer: c