383 $
© 2014 Pearson Canada Inc.$- When a lender refuses to make a loan, although borrowers are willing to pay the stated
interest rate or even a higher rate, the bank is said to engage in ____.
A) coercive bargaining
B) strategic holding out
C) credit rationing
D) collusive behavior
Answer: C
Diff: 1 Type: MC Page Ref: 311
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
1 4) When banks offer borrowers smaller loans than they have requested, banks are said to
____.
A) shave credit
B) rediscount the loan
C) raze credit
D) ration credit
Answer: D
Diff: 1 Type: MC Page Ref: 311
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
Credit risk management tools include ____.
A) deductibles
B) collateral
C) interest rate swaps
D) duration analysis
Answer: B
Diff: 1 Type: MC Page Ref: 308 - 311
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
How can specializing in lending help to reduce the adverse selection problem in lending?
Answer: Reducing the adverse selection problem requires the banks to acquire information to
screen bad credit risks from good credit risks. It is easier for banks to obtain information about
local businesses. Also if the bank lends to firms in a few specific industries they will become
more knowledgeable about those industries and a better judge of creditworthiness in those
industries.
Diff: 1 Type: SA Page Ref: 309
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk