Carolina National Bank Knows That the Interest Rate on Its

question 72

Multiple Choice

Carolina National Bank knows that the interest rate on its loans change faster and by a larger amount than the interest rate on its deposits.What type of risk is this an example of?

• A)Default risk
• B)Inflation risk
• C)Liquidity risk
• D)Call risk
• E)Basis risk

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Definitions:

Accumulated Depreciation

The overall depreciation cost that has been allocated to a fixed asset over the span of its useful life.

Patent Rights

Legal protections granted to inventors, giving them exclusive rights to produce, use, and sell their inventions for a limited period.

Amortization

The process of spreading out a loan or an intangible asset's cost over its useful life.

Useful Life

The estimated period over which an asset is expected to be usable, providing economic benefits to its owner.