If a Bank Attempts to Reduce Exposure to Interest Rate

question 12

Multiple Choice

If a bank attempts to reduce exposure to interest rate risk by replacing long-term marketable securities with more floating-rate commercial loans, it is likely that the bank's

• A) credit risk would decrease.
• B) credit risk would increase.
• C) liquidity risk would increase.
• D) liquidity risk would decrease.
• E) B and C

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Definitions:

Cortisol

A hormone, released during the body’s response to stress, that increases blood glucose levels and affects the immune response.

Epinephrine (Adrenaline)

A hormone and neurotransmitter involved in the body's fight-or-flight response, increasing heart rate, muscle strength, blood pressure, and sugar metabolism.

Cytokines

These chemical messengers are produced by the body as part of its immune response. These proteins can either promote inflammation or reduce it.

Dopamine

A neurotransmitter and a hormone that serves many functions in the body. As a neurotransmitter, it is involved in several brain processes, including reward systems. Low levels of dopamine production are associated with Parkinson’s disease.