If a bank wants to shorten its asset duration, what type of risk is the bank concerned about?  Group of answer choices Off balance sheet risk. The risk of rising interest rates. The risk of falling interest rates. Foreign exchange rate risk.

Q: If a bank is exposed to refinancing risk, its profitability is higher if interest rates and if it is…

A: Refinancing risk refers to the risk that a bank's cost of funding (such as the interest rates it…

Q: 4) All else the same, if a bank's liabilities are more sensitive to interest rate fluctuations than…

A: Sensitivity to interest rate fluctuations comes under the phenomenon of Interest rate Gap, this…

Q: How can a bank mitigate LIQUIDITY RISK? Hold a large percentage of its liabilities in Core Deposits…

A: The correct answer for the above mentioned question is given in the following steps for your…

Q: Suppose that the Fed wants to lower long-term interest rates and buys all the Treasury securities…

A: If the Fed buys all the Treasury securities that banks hold, it will increase the assets on its…

Q: Define interest rate risk and explain why it is very important in the risk management portfolio of a…

A: Interest rate risk is the potential for speculation misfortunes that emerge from a variation in…

Q: Which of the following actions cannot be used by banks to increase reserves? A. Sell Treasury…

A: Reserves  are parts of the income of a corporation that have been set aside to improve the financial…

Q: 1. A type of risk that relates to the changes in the market value of commodities that diminishes the…

A: (Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: The obvious benefit of holding a diversified portfolio of loans is to reduce the impact of single…

A: Yes, there are benefits of holding a non-diversified portfolio of loans as well for a bank.

Q: The following is true for banks managing interest rate risk:     In refinancing risk, banks gain…

A: Step 1 The ability of the bank or financial institution to refinance the matured liabilities at very…

Q: Which one of the following statements is FALSE? Select one: O a. Holding more liquid funds will…

A: Introduction and explanation :The yield of an asset refers to the return or profit generated from…

Q: Which of the following is the risk due to a changes in the stock market?      Business risk…

A: The investments that we make in debt, equity and other financial securities are exposed to different…

Q: Explain whether you agree or disagree with the following statement:

A: Interest rate risk is the risk arising from the fluctuations in the interest rates. It depends…

Q: rates rise, bor

A: The correct option is shown as,

Q: Which of the following statements is false?   A.   Funding risk is the risk that a firm will not…

A: The concept of risk is linked to the uncertainty of future occurrences that may or may not occur.…

Q: Unsystematic risk is * a.the risk associated with movements in securities prices B.higher when…

A: Risk is referred as uncertainty or loss. Financial risk is referred as the variability of actual…

Q: Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care…

A: To evaluate the health and efficiency of these institutions, two paramount metrics are often in…

Q: The financial performance of both Commercial Banks and Savings Banks is measured using the Net…

A: The net interest margin is referred as the net benefit of lending which derived from the lending and…

Q: Systemic risk is a) credit risk. b) an insurance contract against the default of one or more…

A: Systemic risk refers to the risk of widespread disruption or collapse of an entire financial system…

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: Value at Risk (VaR) is a statistical measure of maximum loss used by banks and other financial…

A: Value at Risk is a technique used by institutions to analyze the potential risk assessed in the…

Q: Why do banks hold reserves? How do banks decisions on reserves affect the money supply?

A: Bank reserves are the minimum cash requirements that must be kept by financial firms or institutions…

Q: Explain the concept of liquidity risk in banking. Why is it important to control liquidity risk?

A: Liquidity refers to the ability of a bank to meet its cash and collateral obligations without…

Q: Prove the statement with example "A bank should not sacrifice ether safety or liquidity to earn a…

A: Lending and accepting deposits are the two foremost basic functions as well as the very reason for…

Q: Which of the following statements is false? A.   The sovereign credit rating is a risk of a…

A: A bond is an fixed market instrument that carries less risk than equity.  To check creditworthiness…

Q: Assess the following statements: I. Default risk is the risk that a security issuer will default on…

A: The risk that a lender assumes in the event that a borrower is unable to make the required payments…

Q: Risk-weighted assets increase Risk-weighted assets decrease

A: Step 1 Risk assets are calculated by adding the amount of risk to the appropriate risk weight of the…

Q: Why if your income is in local currency and you issue a bond in dollars, this might be a risky…

A: Issuing bonds in a foreign currency while earning income in a local currency can pose risks related…

Q: Are there any advantages to the equity-holders of banks from them engaging in short-term as opposed…

A: Equity holders enjoy the return from two sources i.e. from the company's end in the form of a…

Q: If a bank manager wants to protect the bank against losses that would be incurred on its portfolio…

A: If a bank manager wants to protect the bank against losses that would be incurred on its portfolio…

Q: If a bank has , rate-sensitive assets than liabilities, then in interest rates will increase bank…

A: Lets understand the meaning of rate sensitive asset and liabilities. Rate sensitive asset and…

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: Match the best answer to each statement. This category include short-term, highly liquid investment…

A: Current assets refer to the assets of a company that are held for the short term and capable of…

Q: 10) Off-balance sheet activities involving guarantees of securities and back-up credit lines A) have…

A: Financial transactions and agreements that are not shown on a bank's balance sheet but may…

Q: Njenge Bank has the following balance sheet (in millions). Liabilities and Equity. Deposits…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Provide a specific transaction that the bank could implement to minimize its interest rate risk. the…

A: In banking, interest rate risk is the possibility of suffering losses as a result of changes in…

Q: A reduction in the willingness of investors to take on risk would have what effect on the Security…

A: Security market line is a visual representation of the capital asset pricing model (CAPM). It is…

Q: If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or…

A: The problem case focuses on identifying the impact of the positive repricing gap on the risk and…

Q: Which of the following statements regarding the banks motives for holding reserves is incorrect ? A…

A: reserves in banks are the part of the deposits kept by the bank to themselves. These reserves are…

Q: Explain why the highest probable key risk drivers in the Single Supervisory Mechanism risk map is:…

A: The current pandemic crisis challenges the banking system along known and unknown tracks. While the…

Q: 2. The Trade-OfT Model A. "The trade-off model of debt financing implies that an increase in the…

A: As you have asked multiple questions, we will solve the first question as per the policy of…

Q: Select all that are true regarding liquidity risk for a bank. O Consumer trust in the bank ensures a…

A: The answer is provided below.

Q: What are the main risks that credit ratings reflect? Do we need credit ratings? What are the…

A: The credit ratings reflect these main risks :  Credit risk or Repayment risk Liquidity risk  Market…

Q: Reinvestment risk occurs when a financial institution holds longer-term assets relative to…

A: Reinvesting means putting the profit back into the same scheme.

Q: Match the correct type of bank risk with the appropriate associated statement. 1.The possibility…

A: Risk is referred as the possibility of the something bad happened. It also involves in an…