4- Which of the following is a concern regulators have about securitization?

Multiple Choice

• The risk of being an underwriter for asset-backed securities that cannot be sold

• The risk that unqualified trustees will fail to protect investors in asset-backed instruments

• The risk of acting as a credit enhancer and underestimating the need for loan-loss reserves

• All of the options are concerns regulators have about securitization

• The risk that loan servicers will be unable to satisfactorily monitor loan performance

1- When investors buy or sell a futures contract, they must deposit a(n) _________ when they first enter into the contract.

2- In an interest-rate swap, the principal amount of the loan, usually called the ________________________, is not exchanged.

3- The buyer of a(n) _________________________ option contract believes that the market price of the underlying security will decline in the future.

4- Which of the following is a reason for standby credit letters' growth in the recent years?

Multiple Choice

• The growth of bank loans sought by companies in recent years

• All of the options are correct

• Regulatory embargo on traditional lenders

• The rapid growth of direct financing by companies

• The decreased demand for risk-reduction devices

5- Which of the following is true regarding regulatory rules for standby credit letters issued by banks?

Multiple Choice

• They must list the standby credit letter as a liability on their balance sheet

• They must provide capital reserve against issued standby letters of credit

• They must count standby credit letters as loans when assessing how risk-exposed the institution is to a single customer

• They do not have to apply the same credit standards for approving standby credit letters as direct loans

• They can apply lower capital standards to standbys than loans