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