A Risk a Bank Takes on by Offering Long-Term Fixed

question 17

Multiple Choice

A risk a bank takes on by offering long-term fixed interest rate loans is:

• A) the loss of real returns due to anticipated inflation
• B) the gain that could be made from offering short-term loans
• C) the loss of real returns due to an unexpected inflation surprise
• D) the gains that could have been made if the money were invested in an alternative asset
• E) the loss of customers wanting flexible interest loans

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Definitions:

Obligor

A person or entity legally bound to provide a benefit or payment to another under the terms of a contract.

Statute of Frauds

A rule of law stipulating that specific kinds of agreements must be documented and signed in order to be legally binding.

Uniform Commercial Code

A compilation of legal regulations and guidelines that dictate the conduct of business transactions and operations in the United States.

Parol Evidence Rule

A principle in contract law that prevents parties from presenting extrinsic evidence to alter or challenge the terms of a written agreement.