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When a financial institution reviews the loan application of an e the lender knows that 26. relative to a non-customer applicant. - A) They can
When a financial institution reviews the loan application of an e the lender knows that 26. relative to a non-customer applicant. - A) They can ignore credit sereening for their existing customer ) The monitoring process will be less expensive D) moral hazard risk will be a little higher The adverse selection risk goes away 27. When interest rates are expected to fall, you are likely to A) B) C) D) Make short-term rather than long-term loans Buy long-term rather than short-term bonds Buy short-term rather than long-term bonds Do nothing to avoid the risk because 28. The main reason why futures contracts are marked to market every day is A) B) C) D) It reduces the chance of loss for the exchange It allows each party to recognize gains or losses It is required by law It makes the accounting simpler 29. When a bank enters into an agreement with a customer to provide a fixed-rate loan whenever this customer wants it, the bank has A) Given the customer a call option to buy the loan B) Given the customer a put option to buy the loan C) Given the customer a put option to sell the equivalent of a bond to the bank D) None of the above as this transaction is no way related to options 30. Which of the following is a disadvantage of the swap as a method for controlling interest rate risk? A) B) C) D) Swaps are more complex Swaps are more expensive than simply restructuring the balance sheet Swaps may not accomplish the goal Swaps lack liquidity
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