International Diversification of Loans Can Best Reduce the Bank's Overall

question 17

Multiple Choice

International diversification of loans can best reduce the bank's overall default risk if

• A)the countries where loans are given are clustered together in a single continent.
• B)the countries where loans are given have economic cycles that do not move together over time.
• C)A and B
• D)none of the above

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Definitions:

Interstate Commerce

Economic activity that crosses state lines, which the United States Congress has the power to regulate according to the Commerce Clause of the Constitution.

Federal Government

The national level of government which has authority over all states within a country, responsible for the nation’s overall governance according to a set of laws or a constitution.

Local Governments

Administrative bodies for areas within a country that are smaller than a state or province, tasked with local policy making and administration.

Private Donations

Financial or material contributions given by individuals, organizations, or companies to private entities or causes without expecting anything in return.