Question

A family takes out a 30-year mortgage loan to purchase a house, and will repay the loan over the next 30 years. This loan is ___________________.

Select the correct answer below:

a bank liability

an asset for the bank

part of the bank's reserves

none of the above

2.

The asset-liability time mismatch, which can cause severe problems for a bank, refers to the possibility for customers to withdraw a bank’s liabilities _____________________ while customers repay its assets __________________.

Select the correct answer below:

at a predictable and consistent rate over time; at an unpredictable and inconsistent rate over time

in the long term; in the short term

in the short term; in the long term

in small amounts; in large amounts

3.

When a bank diversifies its loans, those parts of its lending portfolio with a lot of defaults will tend to be balanced out by parts that have low defaults to help a bank keep ________________.

Select the correct answer below:

a positive net worth

a negative net worth

in good standing with its depositors

in good standing with its creditors

Answer 1

1. Ans: An asset for the bank.

Explanation:

Deposits are liabilities and loans are assets for a bank.

2. Ans: in the short term; in the long term.

3. Ans: A positive net worth.

Explanation:

The diversification of loans can help banks to keep a positive net worth.