Exam 7: Risks of Financial Institutions

To what risk is the bank exposed?

What is the bank's net interest income in dollars in year 3, if it refinances all of its liabilities at a rate of 8.0 percent?

The risk that an investor will be forced to place earnings from a loan or security into a lower yielding investment is known as

An FI that finances long-term fixed rate mortgages with short-term deposits is exposed to

Unanticipated diseconomies of scale or scope are a result of

The risk that interest income will increase at a slower rate than interest expense is

The asset transformation function potentially exposes the FI to

What is the net interest income in dollars if the spot prices at the end of the year are $1.35/£ and €1.35/$ and the liabilities instead cost 7 percent instead of 8 percent?

Interest rate risk management for financial intermediaries deals primarily with

With regard to market value risk, rising interest rates

Politically motivated limitations on payments of foreign currency may expose an FI to