True or False Questions

Please state whether each of the following statements is true or false and provide a short explanation.

1. Northern Rock bank failed because it was highly exposed to the subprime mortgages.

2. Continental Illinois had a lower operation costs because they had fewer branches and heavily relied on the wholesale funding.

3. In Risk adjusted Return on Capital (RAROC) calculation, we use duration model to assess the loan risk and adjust the interest rate risk of the return.

4. An R class tranche of a CMO has a negative duration.

5. Salary is one of the factors for FICO score calculation.

6. FDIC is an ex-post deposit insurance scheme.