Which of the Following Statements Is True

question 52

Multiple Choice

Which of the following statements is true?

• A)RAROC is the risk-adjusted return on capital.
• B)RAROC is calculated as the capital at risk divided by the loan's income.
• C)RAROC should always be below an FI's RAROC benchmark as otherwise the FI increases its default risk exposure.
• D)None of the listed options are correct.

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Definitions:

Detection

The action or process of identifying the presence of something concealed or the discovery of an entity through observation.

Decision

The process of making a choice or finding a solution among several available options.

Signal-Detection Methods

Statistical and methodological techniques used to determine the ability to differentiate between information-bearing patterns and random patterns that distract from the information.

Thresholds

Points or levels at which something starts or changes, often used in context with physiological or psychological responses.