Which of the Following Statements Concerning the Problems of Commercial

question 47

Multiple Choice

Which of the following statements concerning the problems of commercial banks during the 1980s is NOT true?

• A)The rising cost of funds led banks to make riskier loans.
• B)Interest rate risk was at least as great a problem for banks as for thrifts.
• C)Banks increased their exposure to risk through their investments in HLTs.
• D)By limiting diversification, branching restrictions contributed to the increase in bank failures.

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Definitions:

Fixed Costs

Expenses that do not change with the amount of goods or services produced by a business.

Raw Materials

The basic materials from which products are made, often extracted from natural resources and used in manufacturing processes.

Breaking Even

The point at which total revenues equal total costs, resulting in no net loss or gain.

Net Present Value

A financial metric that calculates the present value of all future cash flows associated with a project, minus the initial investment cost.