1. You have 4,000$ limit on your credit card, and the outstanding debt on your card is 1,000$. Choose the correct statement:

Group of answer choices

The amount 4,000$ represents an off-balance sheet item of the bank, while the amount 3,000$ represents a liability of the bank.

The amount 4,000$ represents an off-balance sheet item of the bank, while the amount 1,000$ represents an asset of the bank.

The amount 3,000$ represents an off-balance sheet item of the bank, while the amount 1,000$ represents an asset of the bank.

The amount 1,000$ represents an off-balance sheet item of the bank, while the amount 3,000$ represents an asset of the bank.

2. Choose the incorrect statement on how banks manage their total credit risk.

Group of answer choices

The bank might lend different amounts to different risk groups.

The revenue from borrowers that fully repay their loans covers the loss of the defaulted borrowers within the same risk group.

The revenue from borrowers that fully repay their loans might cover the loss of the non-defaulted borrowers from other risk groups.

Within each risk group, clients pay similar interest rates.

3.

Diversification of the insurance portfolio:

Group of answer choices

None of the statements is correct.

Enables insurance companies achieving less efficient risk-pooling.

Enables insurance companies achieving less efficient risk-pooling and reduces the total costs associated with policyholders claims.

Reduces the total costs associated with policyholders claims.