If a Company Has a Three-Year Loan from a Bank

question 4

Multiple Choice

If a company has a three-year loan from a bank at 7% per annum,and interest rate dropped to 5% near the end of the term,the bank is exposed to:

• A) interest rate risk.
• B) reinvestment risk.
• C) yield-to-maturity risk.
• D) systematic risk.

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Definitions:

Duopoly

A market structure characterized by two companies controlling the majority of the market share for a good or service.

Firm X

A placeholder name commonly used in economic and business contexts to refer to a hypothetical or unidentified company.

Game Theory Matrix

A table or grid representing the possible outcomes of different strategies played by participants in a situation where their decisions affect each other.

Nash Equilibrium

A concept in game theory where each player's strategy is optimal, given the strategies of other players.