Which of the following statements is TRUE?A.An FI is net long in foreign assets if it holds more foreign liabilities than foreign assets. B.Off-balance-sheet activities often affect the shape of a FIs current balance sheet through the creation of contingent claims. C.For an FI to exactly hedge the foreign investment risk, the foreign currency assets must equal the foreign currency liabilities. D.Technology risk is the uncertainty that economies of scale or scope will be realized from the investment in new technologies. E.To be immunized against foreign currency and foreign interest rate risk, an FI should match either the size or the maturities of its foreign assets and foreign liabilities.

Which of the following statements is FALSE?A.An FI is “net long” in foreign assets if it holds more foreign assets than liabilities.B.Matching the size of the foreign currency book will not eliminate the risk of the international transactions if the maturities of the assets and liabilities are mismatched.C.Foreign exchange risk is the risk that exchange rate changes can affect the value of an FI’s assets and liabilities denominated in foreign currencies.D.If the euro is expected to depreciate in the near future, an Australian-based FI in Paris would prefer net long in its foreign (euro) asset positions.E.Given the current spot rate is S$1.50/A$1, if the exchange rate at the end of the year is S$1.00/A$1, the Australian dollar have depreciated against the Singapore dollar.

Which of the following statements is TRUE with regard to the following statement: Immunizing the balance sheet to protect equity holders from the effects of interest rate risk occurs when A.When the modified duration is equal to the dollar duration.B.the effect of a change in the level of interest rates on the value of the assets of the FI is exactly offset by the effect of the same change in interest rates on the liabilities of the FI.C.the maturity gap is zero, so that all assets have a matching-maturity liability.D.the modified duration gap of the balance sheet is zero.E.the repricing gap is zero, so that all assets have a matching liability that reprices at the same time.

Which of the following statements is TRUE?A.A FI is "short-funded" if the maturity of its labilities are shorter than the maturities of its assets. B.Refinancing risk is the risk that the cost of re-borrowing funds will be lower than the return being earned on asset investments. C.If the Swiss franc is expected to appreciate in the near future, a U.S.-based FI in Bern City would prefer to net short in its foreign asset positions.D.FIs face a high level of interest rate risk when performing their brokerage function.E.If a FI is "long-funded", it would incur a loss if interest rates are going to increase significantly in the near future.

Which of the following statements is FALSE?A.When the FI uses its cash as the liquidity adjustment mechanism, both sides of its balance sheet contract.B.An FI's most liquid asset is cash. C.Mutual funds tend to have more exposure to liquidity risk than banks. D.Abnormally large and unexpected deposit withdrawals can occur because of concerns by depositors about a bank's solvency relative to other banks. E.A contagious run, or bank panic, differs from a run on a bank in that a contagious run involves loss of faith in the entire banking system as opposed to just one bank.

Which of the following is not a clear benefit provided by financial institutions?Question 6Select one:a.Economies of Scaleb.Credit Risk Transformationc.Asset Transformationd.Liquidity Risk Transformatione.Economies of Scope