QUESTION 22

1. Because of its simplicity, which of the following models is still used by smaller banks as their primary measure of interest rate risk?

   	A.	The term structure model.
   	B.	The duration model.
   	C.	The convexity model.
   	D.	The maturity model.
   	E.	The repricing model.

1 points

QUESTION 23

1. Which of the following statements is TRUE?

   	A.	Because of compensating balances and fees used to increase return on a loan, the credit risk premium is not the fundamental factor driving the promised return once the base rate on the loan has been set.
   	B.	Because they are secured by homes, residential mortgages have demonstrated very little credit risk for FIs.
   	C.	Credit scoring models are advantageous because these models can sort borrowers into different default risk classes.
   	D.	A borrower's reputation is an example of a market-specific factor in the credit decision.
   	E.	Generally, at the retail level, an FI controls credit risks solely by using a range of interest rates or prices and not by credit rationing.