Which of the Following Situations Pose a Refinancing Risk for an FI

question 43

Multiple Choice

Which of the following situations pose a refinancing risk for an FI?

• A)An FI issues $10 million of liabilities of one-year maturity to finance the purchase of $10 million of assets with a two-year maturity.
• B)An FI issues $10 million of liabilities of two-year maturity to finance the purchase of $10 million of assets with a two-year maturity.
• C)An FI issues $10 million of liabilities of three-year maturity to finance the purchase of $10 million of assets with a two-year maturity.
• D)An FI matches the maturity of its assets and liabilities.

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Definitions:

Means to End

A method or action carried out for the purpose of achieving a specific goal or outcome.

Deontological

Pertaining to an ethical theory that suggests the morality of an action should be based on whether the action itself is right or wrong under a series of rules, rather than based on the consequences of the action.

Utilitarian

Pertaining to the ethical theory that the best action is the one that maximizes utility, generally defined as that which produces the greatest well-being of the greatest number of people.

Amoral

Lacking a moral sense; unconcerned with the rightness or wrongness of something.