(3) An inverted yield curve, in which long-term interest rates are lower than sh
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(3) An inverted yield curve, in which long-term interest rates are lower than short-term interest rates, is a good situation because their cost of funds is based on short-term rates while the interest they charge on loans is based on long-term interest rates. for commercial banks (4) The Basel Committee on Bank Supervision defines an operational loss as the loss in market value due to unexpected changes in the difference between long-term and short-term interest rates. Is that statement true or false?Explanation / Answer
An inverted yield curve, in which long-term interest rates are lower than short-term interest rates, is a good situation for commercial banks because their cost of funds is based on short-term rates, while the interest they charge on loans is based on long-term interest rates. FALSE Cost of Fund is determined by the interest it paid to depositor on financial products for short-term and long-term . The spread between the cost of funds and the interest rate charged to borrowers is main sources of profit for most commercial banks. 4) The Basel Committee on Bank Supervision defines an operational loss as the loss in market value due to unexpected changes in the difference between long-term and short-term interest rates. Is that statement true or false? FALSE Operational risk in Banks is risk of loss resulting from inadequate or failed internal processes, people and systems or from external events
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