Characterize the risk exposure(s) of the following FI transactions by choosing one or more of the risk types listed below:

a. Interest rate risk

b. Credit risk

c. Off-balance-sheet risk

d. Technology risk

e. Foreign exchange risk

f. Country or sovereign risk (1) A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificates of deposit. (2) An insurance company invests its policy premiums in a long-term municipal bond portfolio. (3) A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur. (4) A Japanese bank acquires an Austrian bank to facilitate clearing operations. (5) A mutual fund completely hedges its interest rate risk exposure by using forward contingent contracts.

(6) A bond dealer uses his own equity to buy Mexican debt on the less developed country (LDC) bond market. (7) A securities firm sells a package of mortgage loans as mortgage-backed securities. LO.1