The items mentioned in c involve decisions by

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Unformatted text preview: ts changing changing customer needs (answer A), changes in technology (B), changes in regulation and the and services financial landscape (D). The items mentioned in C involve decisions by governments and are therefore examples of regulatory change. See page 38. 27 4 27 INCORRECT The matching principle: A) applies to corporations that hold real assets but not to financial institutions B) contends that assets should be funded with an equal amount of liabilities C) contends that short-term assets should be financed with short-term liabilities and longer-term assets should be financed with longer-term sources of funds D) contends that, in Feedback: The matching principle is general, assets should be financed by short-term sources befunds that by using based on the idea that risk and transaction costs can of reduced can be rolled over to provide that match the economic lives of the assets being acquired. For s ources of finance with terms to maturitylonger term finance example, long-term assets should be financed with equity and perhaps long-term debt rather than short-term debt. Clearly C is the only answer that is consistent with the matching principle. See page 15. 28 4 28 INCORRECT A financial crisis that affected several Asian countries in the late 1990s began when the value of the Thai baht fellA) excessive after it was floated. Which of the following factors were later identified as being common significantly bank credit encouraged over-investment in assets such as office buildings to the countries affected by this crisis? that was not hedged against foreign exchange risk B) reliance on external borrowing C) significant capital outflows when the confidence of external investors fell D) for International Feedback: The Bank all of the above Settlements identified several weaknesses that were common to the countries that were worst affected by the Asian financial crisis of the late 1990s. These weaknesses included all the items listed in A, B and C making D the correct answer. See page 40. no Results epor < 1table ¶style= 4256361R...
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