1. Which of the following loans looks like it has the lowest risk of loss? a....
1. Which of the following loans looks like it has the lowest risk of loss?
a. An unsecured loan to a BBB borrower
b. A loan to a single B borrower secured by real estate
c. A loan to high yield borrower with a single B rating that is secured by cash equivalent assets
d. A secured loan to a BB-rated borrower secured by inventory
2. The Federal Reserve system makes money and distributes all the profits to its owners (which are the banks in each respective district)
True or False?
3. Which of the following are generally regarded as risks for banks?
a. Counterparty risk
b. Changes in interest rates
c. Default risk
d. Settlement risk
e. All of the above
Homework Answers
Answer,
1. Option c. cash equivalent assets are secured and also no fluctuations affecting in the market situations. so this is less risky compared to other secured loans.
Resons,
Option A is unsecured loan to a BBB borrower is risky.Unsecured loans are always risky.Because secured loans are backed by assets.
Option B .Secured by real estate. Market rates fluctuations are affecting the real estate and it seems secured by real estate also risky.
Option D. Even i also inventory also affecting the market conditions and demand by fluctuating its price. so this is also risky.
2.True. The federal system makes money and it distribute to its members.
3.Option B. Change in interest rate in adverse will affect the profitability of the bank. It is the exposure of banks financial condition.
Counter party risk, default risk and settlement risk also affect the banks profitabilty but only in the seperate division of activity.
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1. Which of the following loans looks like it has the lowest
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projects he plans to undertake than does the lender. This
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A) moral hazard.
B) asymmetric information. C) noncollateralized risk. D)
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2) If bad credit risks are the ones who most actively seek
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A) moral hazard.
B) adverse selection.
C) free-riding.
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