Il True/False Questions 1 2 6 7 (Write down your ANSWERS HERE:) 3 4 8 9 5 10 1. When the Fed finds it necessary to slow economic activity, it allows Interest rates to fall 2 In duration analysis, the times at which cash flows are received are weighted by the relative importance in present value terms of the cash flows arriving at each point in time. 2. The primary difficulty in arranging a syndicated loan is having all of the various lending and borrowing parties teach agreement on terms, rates, and collateral. 4. Portfolio nisk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated 5. Abnormally large and unexpected deposit withdrawals can occur because of concerns by depositors about a bank's solvency relative to other banks. 6. The spot foreign exchange market is where forward and futures contracts and swap agreements are transacted. 7. All of the following are relevant determinants of sovereign risk exposure: the rate of domestic money supply growth, the variance of export revenue, and the size of the population 8. Calculating the risk of a multi-asset trading portfolio requires the consideration of the correlations of returns between the different assets. 9. The Federal Reserve requires banks to complete schedule with their quarterly call reports to list the notional size and variety of off-balance-sheet activities. 10. Basis risk occurs on a loan commitment because the spread of a pricing index over the cost of funds may vary. Il True/False Questions 1 2 6 7 (Write down your ANSWERS HERE:) 3 4 8 9 5 10 1. When the Fed finds it necessary to slow economic activity, it allows Interest rates to fall 2 In duration analysis, the times at which cash flows are received are weighted by the relative importance in present value terms of the cash flows arriving at each point in time. 2. The primary difficulty in arranging a syndicated loan is having all of the various lending and borrowing parties teach agreement on terms, rates, and collateral. 4. Portfolio nisk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated 5. Abnormally large and unexpected deposit withdrawals can occur because of concerns by depositors about a bank's solvency relative to other banks. 6. The spot foreign exchange market is where forward and futures contracts and swap agreements are transacted. 7. All of the following are relevant determinants of sovereign risk exposure: the rate of domestic money supply growth, the variance of export revenue, and the size of the population 8. Calculating the risk of a multi-asset trading portfolio requires the consideration of the correlations of returns between the different assets. 9. The Federal Reserve requires banks to complete schedule with their quarterly call reports to list the notional size and variety of off-balance-sheet activities. 10. Basis risk occurs on a loan commitment because the spread of a pricing index over the cost of funds may vary