Questions
25741 Capital Markets - Autumn 2025 Quiz 1 - GRADED
Single choice
Financial intermediaries can engage in credit risk transformation because they:
Options
A.can pool savers' short-term deposits and make long-term loans.
B.can quickly convert financial assets into cash, close to the current market price.
C.develop expertise in lending and diversifying loans.
D.obtain cost advantages owing to their size and business volumes transacted.
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Step-by-Step Analysis
The question asks why financial intermediaries can engage in credit risk transformation.
Option 1: 'can pool savers' short-term deposits and make long-term loans.' This describes maturity transformation and liquidity transformation rather than credit risk transformation per se. It explains how duration and liquidity risk are managed, but it does not ......Login to view full explanationLog in for full answers
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Question3 How many of the following statements are correct in regards to intermediated financing arrangements? I. Users of funds obtain financing directly from money and capital marketsII. Financial instruments are issued directly between savers and borrowersIII. A commercial bank stands between savers and borrowers, with two separate contractual agreementsIV. Borrowers avoid the costs of intermediation and have increased flexibility in issuing securitiesV. There are higher search costs for suppliers of funds Two statements are correct Three statements are correct Four statements are correct All five statements are correct One statement is correct ResetMaximum marks: 1 Flag question undefined
Question3 How many of the following statements are correct in regards to intermediated financing arrangements? I. Users of funds obtain financing directly from money and capital marketsII. Financial instruments are issued directly between savers and borrowersIII. A commercial bank stands between savers and borrowers, with two separate contractual agreementsIV. Borrowers avoid the costs of intermediation and have increased flexibility in issuing securitiesV. There are higher search costs for suppliers of funds All five statements are correct One statement is correct Four statements are correct Three statements are correct Two statements are correct ResetMaximum marks: 1 Flag question undefined
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