The Possibility That the Failure of One Bank Affects the Performance

question 186

Multiple Choice

The possibility that the failure of one bank affects the performance of other banks is called:

• A) moral hazard.
• B) a liquidity crisis.
• C) systemic risk.
• D) credit risk.

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Definitions:

Risky Assets

Assets with a high degree of uncertainty regarding their returns, with the potential for both high losses and high returns.

Treasury Bills

Short-term government securities issued at a discount from the face value and mature at par.

Historical Returns

The past financial performance of an investment, often presented as an average annual return rate over a specific time period.

Small Firms

Companies with a smaller market capitalization, often characterized by higher potential growth and higher risk.