10. Risk Explain why many savings institutions experience financial problems at the same time.

1. Exposure to Interest Rate Risk Is the cost of funds obtained by finance companies very sensitive to market interest rate movements? Explain.

2. Issuance of Commercial Paper How are small and medium-sized finance companies able to issue commercial paper? Why do some well-known finance companies directly place their commercial paper?

3. Finance Company Affiliations Explain why some finance companies are associated with automobile manufacturers. Why do some of these finance companies offer below-market rates on loans?

4. Uses of Funds Describe the major uses of funds by finance companies.

7. Regulation of Finance Companies Describe the kinds of regulations that are imposed on finance companies.

8. Liquidity Position Explain how the liquidity position of finance companies differs from that of depository institutions such as commercial banks.

9. Exposure to Interest Rate Risk Explain how the interest rate risk of finance companies differs from that of savings institutions.

10. Exposure to Credit Risk Explain how the default risk of finance companies differs from that of other lending financial institutions.