Which of the Following Are Correct About Off-Balance Sheet Activities

question 37

Multiple Choice

Which of the following are correct about off-balance sheet activities?

• A)They provide a key source of interest income for many FIs.
• B)By hedging against on-balance-sheet interest rate, FX and credit risks, OBS derivative instruments actually reduce FI overall insolvency risk.
• C)Higher regulatory costs on derivative instruments may cause FIs to over-hedge resulting in a decrease in FI insolvency risk.
• D)All of the listed options are correct.

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Definitions:

Manufacturing Environment

The setting or conditions in which manufacturing processes occur, involving production of goods in factories.

Raw Materials

Raw materials are the basic, unprocessed materials used as inputs in the manufacturing process to produce finished goods.

Work in Process

Goods that are in production but have not yet completed the manufacturing process, considered a type of inventory on the balance sheet.

Finished Goods

A rephrased definition: Products that have completed the manufacturing process and are ready to be sold but are still in the company's inventory.