Bond Assignment | Professional Writing
10. Sumitomo Bank’s trading portfolio includes two components; foreign exchange and bonds. The risk manager of Sumitomo has estimated that the DEARs of these two components are -$150 and -$250, respectively. What is the aggregate DEAR of Sumitomo’s trading portfolio if the correlation among the two assets is 1.0? -$100 -$291.548 -$350 -$380.789 -$400 déoco 11. In making credit decisions, which of the following is false? a. Borrower’s reputation, leverage, volatility of earnings, and collateral value are borrower- specific factors.
b. Large loans are based on considerable information collection and borrowers are charged an interest rate based on their credit risk, smaller loans are based on less information collection and greater emphasis is put on loan to value ratio. The position of the economy in the phase of the business cycle is a market-specific factor d. In periods of unusually high interest rates (e.g., 15%-20%), borrowers prefer adjustable-rate to fixed-rate loans e. Since borrower income is sensitive to the phase of the business cycle, borrower income is a market- specific factor c.
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