1. Characterise the risk exposure(s) of the following FI transactions (i–vii) by choosing one or more of the risk types listed below:

Interest rate risk Credit risk Off-balance-sheet risk Technology risk Foreign exchange rate risk Country or sovereign risk A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificates of deposit.

An insurance company invests its policy premiums in a long-term municipal bond portfolio.

A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur.

A Japanese bank acquires an Austrian bank to facilitate clearing operations.

A managed fund completely hedges its interest rate risk exposure by using forward contingent contracts.

An Australian bond dealer uses its own equity to buy Mexican debt on the less-developed country (LDC) bond market.

An Australian securities firm sells a package of mortgage loans as mortgage-backed securities. LO 4.1, 4.3, 4.4, 4.5, 4.7, 4.8