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.

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Definitions:

Objects

Physical items that can be seen and touched.

Self-Fulfilling Prophecy

A phenomenon where a belief or expectation, whether correct or not, influences the outcome in a way that confirms the belief.

Expectations

Anticipated outcomes or behaviors in a given situation.

Behavior

The actions or reactions of an individual or group, often in response to their environment.