Which of the Following Economic Characteristics Is Consistent with a Commercial

question 75

Multiple Choice

Which of the following economic characteristics is consistent with a commercial bank?

• A) Low barriers to entry.
• B) High levels of research and development.
• C) Low profit margin on lending activities.
• D) Low profit margin on fee-based financial services, such as merger consulting.

---

Definitions:

Risk-Free Rate

The interest rate at which an investor can lend money with no risk of default, often represented by the yield on government bonds.

APT

The Arbitrage Pricing Theory is a model that predicts asset returns based on the relationship between an asset's return and several macroeconomic factors.

CAPM

The Capital Asset Pricing Model, a model that describes the relationship between systemic risk and expected return for assets, particularly stocks.

Risk-Return Relationship

The principle that potential return increases with an increase in risk, describing the trade-off between the desire for the lowest possible risk and the highest possible return.