Question #13
Reading: Reading 11 Analysis of Financial Institutions
PDF File: Reading 11 Analysis of Financial Institutions.pdf
Page: 5
Status: Correct
Correct Answer: A
Question
Compared to manufacturing or merchandising companies, financial institutions are most likely to have higher direct exposures to:
Answer Choices:
A. market risk, credit risk, liquidity risk, and interest rate risk
B. operational risk, process risk, political risk, and compliance risk
C. inflationary risk, business risk, exchange rate risk, and legal risk
Explanation
Because the productive assets of financial institutions are primarily financial assets such
as securities and loans, financial institutions are likely to have significant direct exposures
to risks such as credit risk, liquidity risk, market risk, and interest rate risk.