Banks Experience Interest Rate Risk

question 42

Multiple Choice

Banks experience interest rate risk

• A)if adverse selection problems are particularly severe.
• B)if moral hazard problems are particularly severe.
• C)on any investment that has high information costs.
• D)if changes in interest rates cause bank profits to fluctuate.

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Definitions:

Glass-Steagall Act

A U.S. law enacted in 1933 during the Great Depression that separated commercial banking from investment banking to reduce financial risk and prevent future bank failures.

Stock Markets

Marketplaces where securities, such as stocks and bonds, are bought and sold, determining the value of publicly traded companies.

George H. W. Bush

The 41st President of the United States (1989-1993) known for leading the country during the end of the Cold War and the Gulf War.

Foreign Policy Action

Actions taken by a nation's government to achieve its objectives in its relations with other countries.