QUESTION 11

PART A:

Which of the following loan-like financial instruments would you expect to have a substantially lower quoted base interest rate than a conventional fixed-rate, amortizing loan?

a.

an Islamic-type financial instrument, or add-on loan

b.

shared appreciation mortgage

c.

reverse annuity mortgage

d.

both a and b

e.

all of the above--a, b, and c

PART B:

Which of the following types of risk would be most associated with the idea that a bank could have negative equity and that shareholders could lose all their investment funds?

a.

capital solvency risk

b.

liquidity risk

c.

credit risk

d.

default risk

e.

operational risk