24 Questions
The overnight borrowing rate is adjusted by the central bank to primarily control inflation.
True
The overnight borrowing rate is only used for long-term lending between financial institutions.
False
Debt trading only involves government-issued bonds.
False
The overnight borrowing rate has no impact on interest rates for loans and mortgages.
False
Central banks have no role in setting the overnight borrowing rate.
False
Debt trading occurs on the primary market.
False
Municipal bonds offer higher returns compared to government bonds.
False
The overnight borrowing rate is only used by commercial banks.
False
Banks may offer lower interest rates for loans with higher perceived credit risk.
False
Collateral is not required for loans with high credit risk.
False
Effective credit risk management can lead to decreased financial stability.
False
Nonperforming loans can increase bank profits.
False
A nonperforming loan is a loan where a borrower is ahead of their repayments.
False
A high number of nonperforming loans strengthens a bank's financial health.
False
Nonperforming loans can have no impact on economic growth.
False
Nonperforming loans cannot lead to a financial crisis.
False
Mortgage-backed securities can only be bought and sold on the primary market.
False
Investing in an MBS provides exposure to a single mortgage, increasing risk.
False
Credit risk is only a concern for non-banking financial institutions.
False
Banks only use strict creditworthiness assessment to manage credit risk.
False
Late payments from borrowers do not affect a bank's cash flow.
False
Debt restructuring always leads to loan default.
False
The 'Five Cs of Credit' framework is only used for personal loans.
False
Loan portfolio diversification increases a bank's risk exposure.
False
Learn about the overnight borrowing rate, its key aspects, and how it affects banks and financial institutions in the economy.
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