QUESTION: 141 Exam Topic: 2 Volume B

Which one of the following is a reason for a bank to keep a commercial loan in its portfolio until maturity?

I) Commercial loans usually have attractive risk-return profile.
II) Commercial loans are difficult to sell due to non standard features.
III) Commercial loans could be used to maintain good relations with important customers.
IV) The credit risk in commercial loans is low.

I, II and III
III and IV
II and IV
IV only

Answer(s): A

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QUESTION: 142 Exam Topic: 2 Volume B

Which of the following statements is a key difference between customer loans and interbank loans?

Customers are less credit-worthy than banks on average and hence yields are higher on average for customer loans as compared to interbank loans
Customer loans are of shorter duration than interbank loans
Customer loans are easier to sell than interbank loans
Interbank loans are more customized than commercial loans

Answer(s): A

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QUESTION: 143 Exam Topic: 2 Volume B

Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?

Interest rate risk and credit risk
Interest rate risk only
Credit Risk only
The bank does not incur any risk since the loan is not yet originated

Answer(s): B

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QUESTION: 144 Exam Topic: 2 Volume B

Which one of the following four statements about preferred shares is INCORRECT?

Preferred shares refer to a class of securities that is a cross between equity and debt.
Preferred shares represent residual of a corporation after its other liabilities have been paid.
Preferred shares are subordinated to debt.
Preferred shares can be perpetual or have maturities far exceeding debt maturities.

Answer(s): B

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QUESTION: 141 Exam Topic: 2 Volume B

QUESTION: 142 Exam Topic: 2 Volume B

QUESTION: 143 Exam Topic: 2 Volume B

QUESTION: 144 Exam Topic: 2 Volume B