How does proprietary trading expose investment banks to interest-rate and credit risk?
What will be an ideal response?
Prices of investment bank holdings of long-term securities may decline if market interest rates rise. Credit risk exists as investment banks are exposed to the possibility of that borrowers may default on their loans.
You might also like to view...
The aggregate demand curve would shift to the right as a result of
A) a decrease in the U.S. real interest rate. B) tax increases. C) a decrease in the amount of money in circulation. D) a drop in the price level.
A technique for locating equilibria by marking the best strategy a player can use to counter each of his or her rival's possible moves is called
A) a win-win situation. B) cooperative coordination. C) cell-by-cell inspection. D) best-response analysis.
Suppose the United Automobile Workers union agrees to accept lower wages for members if the automobile manufacturers lower their prices to buyers
Will the UAW's measures usually result in a larger number of cars being sold and hence more jobs for UAW members? A) No, because people only buy new cars when they need them. B) Not if the price elasticity of demand for new cars turns out to be less than one. C) Only in the unlikely event the demand for new cars is unit elastic. D) Probably not, because new car sales depend on advertising. E) Yes.
"Higher prices always yield higher revenues." Do you agree or disagree? Why?
What will be an ideal response?