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NEW QUESTION: 1
What would be the consequences of a model of economic risk capital calculation that weighs all loans equally regardless of the credit rating of the counterparty?
I. Create an incentive to lend to the riskiest borrowers
II. Create an incentive to lend to the safest borrowers
III. Overstate economic capital requirements
IV. Understate economic capital requirements
A. II and III
B. I and IV
C. I only
D. III only
Answer: B
Explanation:
Explanation
If capital calculations are done in a standard way regardless of risk (as reflected by credit ratings), then it creates a perverse incentive for the lenders' employees to lend to the riskiest borrowers that offer the highest expected returns as there is no incentive to 'save' on economic capital requirements that are equal for both safe and unsafe borrowers. Therefore statement I is correct.
Given that the portfolio of such an institution is likely to then comprise poor quality borrowers, and economic capital would be based upon 'average' expected ratings, it is likely to carry lower economic capital given its exposures. Therefore any such economic risk capital model is likely to understate economic capital requirements. Therefore statement IV is correct.
Statements II and III are incorrect and Choice 'b' is the correct answer.

NEW QUESTION: 2
Which of the following connectors types is MOST to be used to terminate fibre optics?
A. BNC
B. SC
C. F-type
D. Rj45
Answer: D

NEW QUESTION: 3


Answer:
Explanation:

NEW QUESTION: 4
Which is a function of the first tier in the IBM Cognos BI architecture?
A. Pass requests to a IBM Cognos BI dispatcher for processing.
B. Start IBM Cognos BI services configured and enabled on a computer.
C. Render the IBM Cognos Connection and Metric Studio interfaces.
D. Authenticate users to the correct namespace.
Answer: A