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Long-term customer relationships ____ the cost of information collection and make it
easier to ____ credit risks.
A) reduce; screen
B) increase; screen
C) reduce; increase
D) increase; increase
Answer: A
Diff: 1 Type: MC Page Ref: 309 - 310
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
Unanticipated moral hazard contingencies can be reduced by ____.
A) screening
B) long-term customer relationships
C) specialization in lending
D) credit rationing
Answer: B
Diff: 1 Type: MC Page Ref: 309 - 310
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
A bank's commitment to provide a firm with loans up to pre-specified limit at an interest rate
that is tied to a market interest rate is called ____.
A) an adjustable gap loan
B) an adjustable portfolio loan
C) loan commitment
D) pre-credit loan line
Answer: C
Diff: 1 Type: MC Page Ref: 310
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
Property promised to the lender as compensation if the borrower defaults is called ____.
A) collateral
B) deductibles
C) restrictive covenants
D) contingencies
Answer: A
Diff: 1 Type: MC Page Ref: 310 - 311
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk