1. Which of the following is Non-market related contingent liability?

a. Standby LC

b. All of the the other listed options re correct.

c. Line of credit

d. Revolving loan commitments

e. Notes issuance facilities

2. Which of the following statements is true?

a. The fundamental lesson of modern portfolio theory (MPT) is that by taking advantage of its profitability, an FI can diversify considerable amounts of credit risk as long as the returns on different assets are imperfectly correlated.

b. The fundamental lesson of modern portfolio theory (MPT) is that by taking advantage of its profitability, an FI can diversify considerable amounts of credit risk as long as the returns on different assets are perfectly correlated.

c. The fundamental lesson of modern portfolio theory (MPT) is that by taking advantage of its profitability, an FI can diversify considerable amounts of credit risk as long as the returns on different assets are not correlated.

d. The fundamental lesson of modern portfolio theory (MPT) is that by taking advantage of its size, an FI can diversify considerable amounts of credit risk as long as the returns on different assets are imperfectly correlated.

3. Assume that an FI's concentration limit on a particular sector is 15 per cent and that the sector's loss rate is 25 per cent. What is the maximum loss as a percentage of the FI's capital (round to two decimals)?

a. Not enough information to decide.

b.3.75 per cent

c1.67 per cent d.0.60 per cent e. 10.00 per cent

4.

Credit scoring models include:

a. linear discriminant analysis. b. logit models. c. linear probability models. d. All of the other listed options are correct.