An Adverse Material Changes in Conditions Clause Is Included in Loan

question 63

Multiple Choice

An adverse material changes in conditions clause is included in loan commitments to protect the FI against:

• A)funding risk
• B)interest rate risk
• C)takedown risk
• D)credit risk

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Definitions:

Inflation

A period when prices in general are rising and the purchasing power of money is declining.

Price Levels

General price indices reflecting the overall movement of prices within an economy over a period of time, affecting purchasing power and inflation rates.

Present Value

The present worth of a future sum of money or series of cash flows, considering a given return rate.

Compound Interest

In this method, interest is accrued on the principal sum as well as on the interest that has been accumulated over prior periods of the investment or loan.