1. When a bank tries to make a wide variety of loans, to various kinds of borrowers, it is hoping to reap the benefit of:

A. guaranteed income B. diversification C. more firm-specific risk exposure D. reduced operational risk E. reduced off-balance-sheet risk

2. In 2005, Argentina offered its creditors 30 cents on the dollar for a sizeable amount of its outstanding debt. The offer was nonnegotiable. Clearly, Argentinas creditors were exposed to ______________ risk.

A. sovereign B. operational C. technology D. interest rate E. (b) and (c)

3. In the mid-2000s, many banks lost billions of dollars on failing mortgage loans. The risk of such occurrences would be categorized as:

A. off-balance-sheet risk B. operational risk C. credit risk D. technology risk E. country or sovereign risk

4. Bank-Xs outstanding loans all have fixed interest rates, with maturities more than two years. The banks deposit liabilities all have maturities of no more than six months. Bank-X most obviously is facing:

A. Credit risk B. Insolvency risk C. Liquidity risk D. Operational risk E. Interest rate risk