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Financial Transactions.....Risk Type.......
This question was answered on Jun 28, 2010. View the Answer
Financial Transactions.....Risk Type....Describe and justify risk type Interest Rate or Interest Income?

(1)A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificate of deposit.
(2)An insurance company invests its policy premiums in a long-term municipal bond portfolio.
(3) A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur.
(4)A Japanese bank acquires an Austrian bank to facilitate clearing operations.
(5)A bond dealer uses his own equity to buy Mexican debt on the less developed country (LDC) bond market.
(6)A securities firm sells a package of mortgage loans as mortgage-backed securities.
Describe the features of the method you would choose to measure the interest risks identified.


FIN366r1_Week_4_Financial_Transactions_Risks.doc

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

Describe and justify risk type
Typ
e

A bank finances a $10 million, six-year fixed-rate
commercial loan by selling one-year certificate of
deposit.
An insurance company invests its policy premiums in
a long-term municipal bond portfolio.
A French bank sells two-year fixed-rate notes to
finance a two-year fixed-rate loan to a British
entrepreneur.
A Japanese bank acquires an Austrian bank to
facilitate clearing operations.
A bond dealer uses his own equity to buy Mexican
debt on the less developed country (LDC) bond
market.
A securities firm sells a package of mortgage loans as
mortgage-backed securities.
Describe the features of the method you would choose to measure the interest risks identified.

Interest
Rate
or
Inter
est
Inco
me?

Dear Student, Please find all the answers to y... View the full answer

FIN366r1_Week_4_Financial_Transactions_Risks.doc

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...

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