FIN366 Financial Transactions Risk

FIN366 Financial Transactions Risk - Financial Transaction...

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Financial Transaction Risks 1 Financial Transactions Risk FIN/366
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Financial Transaction Risks 2 University of Phoenix Material Week Four Individual Assignment: Financial Transaction Risks Describe the risk exposure(s) in the following financial transactions. Identify which transactions are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!) Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk Financial Transactions Risk Type Describe and justify risk type Interest Rate or Inter est Inco me? A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificate of deposit. Interest rate and Credit risk Do to the change in interest rate the value of the fixed rate assets will change. Credit risk because cash flows from the loan may be paid over time and not in full. Both An insurance company invests its policy premiums in a long- term municipal bond portfolio.
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