1.To gain the benefit of _______________, a bank makes various types of loans, to various types of borrowers.

A.guaranteed income

B.diversification

C.more firm-specific risk exposure

D.reduced operational risk

E.reduced off-balance-sheet risk

2.Argentina unilaterally told its creditors in 2005 that it would henceforth repay only $0.30 for every $1.00 of its debt that was outstanding. Argentina's creditors had been exposed to ______________ risk, which was then realized.

A.sovereign

B.operational

C.technology

D.interest rate

E.(b) and (c)

3.Many banks lost considerable amounts on failing real estate mortgage loans about the time of the Financial Crisis of 2007-08.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.All of Hometown Bank's outstanding loans are fixed interest rates with maturities over two years. Hometown's deposits all have maturities less than six months, either overnight checking account deposits or six-month CDs. From this fact alone, Hometown is facing:

A.Credit risk

B.Insolvency risk

C.Liquidity risk

D.Operational risk

E.Interest rate risk

5.If an unanticipated increase in deposits withdrawals forces a Savings Institution to sell balance sheet assets at "fire sale" prices, the SI was exposed to ____________.

A.credit risk.

B. liquidity risk.

C.interest rate risk.

D.sovereign risk.

E.technology risk.