A Common Method for Banks to Reduce Their Credit Risk

question 29

Multiple Choice

A common method for banks to reduce their credit risk is to

• A)specialize in loans to one or a few industries in which they have expertise in assessing creditworthiness.
• B)specialize in loans to companies whose earnings patterns are quite similar over time.
• C)specialize in loans to one or a few industries in which they have expertise in assessing creditworthiness AND specialize in loans to companies whose earnings patterns are quite similar over time.
• D)None of these are correct.

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Definitions:

SEC Regulations

Rules and guidelines issued by the Securities and Exchange Commission to govern securities markets and protect investors.

Online Advertising

Online advertising is the use of internet-based platforms to promote products, services, or brands to potential consumers.

Cognitive Elements

The mental processes, such as perception, memory, and problem-solving, that underlie understanding and reasoning.

ABC Model

A framework used in psychology that describes the impact of an individual's beliefs about an event on their emotional and behavioral reactions, emphasizing the cognitive evaluation of events.