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Question 5 1 pts Which of the following statements about off-balance-sheet activities is not correct? A loan commitment is an agreement to provide a loan
Question 5 1 pts Which of the following statements about off-balance-sheet activities is not correct? A loan commitment is an agreement to provide a loan up to a certain dollar amount if a customer requests the loan during a specific time period. The danger of banks engaging in activities such as trading in financial futures and interest-rate swaps is that these activities allow banks to engage in speculation O When a bank sells all or part of the cash stream from a specific loan, it removes the loan from its balance sheet and earns a profit by selling the loan for an amount slightly greater than that of the original loan. Off-balance-sheet activities consist of trading financial instruments and generating income from fees and loan sales, all of which affect bank profits but are not visible on bank balance sheets. Off-balance-sheet activities involving guarantees of securities and backup credit lines do not increase the credit risk a bank faces
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