When an FI Pre-Commits to Lending at a Fixed Rate

question 110

Multiple Choice

When an FI pre-commits to lending at a fixed rate, it is exposed to

• A)credit risk.
• B)interest rate risk.
• C)takedown risk.
• D)funding risk.
• E)exchange rate risk.

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Definitions:

Business Monopoly Power

The ability of a single company to control an entire market, limiting competition and setting prices.

Resource Allocation

The process of assigning available resources in the most efficient manner to meet the objectives of an organization or economy.

Innovation Encouragement

Initiatives or policies designed to foster new ideas, products, or methods, particularly in technology, medicine, or other fields.

Economic Profit

The difference between a firm's total revenues and the sum of its explicit and implicit costs, indicating its overall financial health beyond just accounting profits.