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

question 113

Multiple Choice

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

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

---

Definitions:

Higher Prices

An increase in the cost of goods or services.

Tax

A compulsory monetary fee or different form of levy required from a taxpayer by a governmental body, used to finance government operations and various public costs.

Sellers

Entities or individuals that provide goods or services in exchange for payment, crucial to the operation of any market.

Tax

A compulsory financial charge imposed by a government on individuals, corporations, or goods to finance government activities and public expenditure.