From the Perspective of an FI, Which of the Following

question 27

Multiple Choice

From the perspective of an FI, which of the following is an advantage of a floating-rate loan?

• A)Stable interest payments will be received throughout the loan period.
• B)The pre-specified interest rate remains in force over the loan contract period no matter what happens to market interest rates.
• C)The bank can request repayment of a loan at any time in the contract period.
• D)The default risk is completely eliminated.
• E)The interest rate risk is transferred to the borrower.

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Definitions:

Orbital

A mathematical function that describes the wave-like behavior of either one electron or a pair of electrons in an atom.

Pyrrolidine

An organic compound with the molecular formula C4H9N, consisting of a five-membered ring containing four carbon atoms and one nitrogen atom.

Lone Pair

A pair of valence electrons in an atom that is not shared with another atom and does not participate in bonding.

Physostigmine

An alkaloid used as a drug to treat glaucoma and anticholinergic poisoning, acting as a reversible cholinesterase inhibitor.