35633Fin 366 Week 4 Assignment
Craig Cook
FIN/366 - FINANCIAL INSTITUTIONS
Instructor: JOAN BROWN
University of Phoenix
Week Four Individual Assignment: Financial Transaction Risks
Explain the risk exposure(s) in the subsequent financial dealings. Spot which deals are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!)
Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk
Financial Transactions
Risk Type
Describe and justify risk type
Interest Rate or Interest Income?
A bank invests a $10 million, six-year fixed-rate business loan by selling one-year certificate of deposit.
Interest rate risk
Built from possible of interest rate altering from year 1 to 2 that could cause profits to be lost that might have been gained in the preceding year.
Interest income
An insurance company spends its policy premiums in a long-term municipal bond portfolio.
Credit risk,
Risk is lesser than the longer the term of the bond
Interest income
A French bank sells two-year fixed-rate notes to back a two-year fixed-rate loan to a British capitalist.
Foreign exchange rates, sovereign risk exchange rate alters can unfavorably influence the worth of an FI’s advantages and liabilities denominated in foreign currencies,
The risk that repayments from foreign borrowers may be disrupted because of intrusion from foreign governments
Interest rate
A Japanese bank acquires an Austrian bank to assist clearing procedures. Sovereign risk
Risk of repayment of foreign borrowers could be disrupted by intrusion from foreign government
Interest income
A bond trader utilizes his own equity to buy Mexican debt on the less developed country (LDC) bond market.
Foreign exchange and sovereign risk
Risk of repayment could be disrupted by intrusion from foreign government, and exchange rate alters can unfavorably influence the worth of an FI’s advantages and liabilities denominated in foreign currencies
Interest rate
A securities
FIN/366 - FINANCIAL INSTITUTIONS
Instructor: JOAN BROWN
University of Phoenix
Week Four Individual Assignment: Financial Transaction Risks
Explain the risk exposure(s) in the subsequent financial dealings. Spot which deals are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!)
Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk
Financial Transactions
Risk Type
Describe and justify risk type
Interest Rate or Interest Income?
A bank invests a $10 million, six-year fixed-rate business loan by selling one-year certificate of deposit.
Interest rate risk
Built from possible of interest rate altering from year 1 to 2 that could cause profits to be lost that might have been gained in the preceding year.
Interest income
An insurance company spends its policy premiums in a long-term municipal bond portfolio.
Credit risk,
Risk is lesser than the longer the term of the bond
Interest income
A French bank sells two-year fixed-rate notes to back a two-year fixed-rate loan to a British capitalist.
Foreign exchange rates, sovereign risk exchange rate alters can unfavorably influence the worth of an FI’s advantages and liabilities denominated in foreign currencies,
The risk that repayments from foreign borrowers may be disrupted because of intrusion from foreign governments
Interest rate
A Japanese bank acquires an Austrian bank to assist clearing procedures. Sovereign risk
Risk of repayment of foreign borrowers could be disrupted by intrusion from foreign government
Interest income
A bond trader utilizes his own equity to buy Mexican debt on the less developed country (LDC) bond market.
Foreign exchange and sovereign risk
Risk of repayment could be disrupted by intrusion from foreign government, and exchange rate alters can unfavorably influence the worth of an FI’s advantages and liabilities denominated in foreign currencies
Interest rate
A securities