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:

Personality

The characteristic set of behaviors, cognitions, and emotional patterns that evolve from biological and environmental factors, shaping an individual's unique traits.

Rational

Based on reasoning or logic, often as opposed to emotional or instinctual decision-making.

Noble Goals

High-minded objectives or aspirations that are morally dignified or of high moral character.

Unpleasant Emotions

Feelings that are often considered negative and undesirable, such as sadness, anger, fear, or frustration.