Chat with AIExam 23: Risk Management in Financial Institutions
When a lender refuses to make a loan,even though borrowers are willing to pay the stated interest rate or even a higher rate,it is said to engage in ________.
(32) 
VerifiedE
How is credit risk related to the concepts of adverse selection and moral hazard?
(41) Verified
Explain how banks benefit from long-term customer relationships.
(36) 
Answered by Examlex AI CopilotBanks benefit from long-term customer relationships in several ways. Firstly, long-term customers are more likely to use a wider range of banking services, such as savings accounts, loans, mortgages, and investment products. This means that the bank can generate more revenue from these customers through fees and interest charges.
Secondly, long-term customers are more likely to recommend the bank to their friends and family, which can help the bank attract new customers through word-of-mouth referrals. This can reduce the bank's customer acquisition costs and help to grow its customer base.
Additionally, long-term customers are more likely to provide valuable feedback to the bank, which can help the bank improve its products and services. This can lead to higher customer satisfaction and retention, as well as a stronger reputation in the market.
Furthermore, long-term customer relationships can also help the bank reduce its credit risk. When a bank has a long history with a customer, it can better assess their creditworthiness and make more informed lending decisions.
Overall, long-term customer relationships can lead to higher revenues, lower customer acquisition costs, improved products and services, and reduced credit risk for banks. Therefore, building and maintaining long-term customer relationships is crucial for the success of banks.
What is the difference between income gap analysis and duration gap analysis?
(39) Which of the following are not generally rate-sensitive assets?
(26) When a lender refuses to make a loan,although borrowers are willing to pay the stated interest rate or even a higher rate,it is said to engage in ________.
(30) Table 23.1
First National Bank
-Referring to Table 23.1,if interest rates rise by 5 percentage points,then bank profits (measured using gap analysis)will
-Referring to Table 23.1,if interest rates rise by 5 percentage points,then bank profits (measured using gap analysis)will (33) If interest rates rise by 5 percentage points,then bank profits (measured using gap analysis)will increase regardless of the income gap.
(43) Duration analysis involves comparing the average duration of the bank's ________ to the average duration of its ________.
(29) If a decline in interest rates causes the market value of a bank's net worth to rise,then the bank must have a ________.
(33) If a bank has more rate-sensitive liabilities than assets,then an increase in interest rates will reduce bank profits.
(35) Credit rationing occurs when lenders charge higher interest rates on the loans they make to riskier borrowers.
(36) Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for several maturity subintervals by the change in the interest rate is called
(35) Of the following methods that banks might use to reduce moral hazard problems,the one not legally permitted in the United States is the requirement that
(31) If First State Bank has a gap equal to a positive $20 million,then a 5 percentage point drop in interest rates will cause profits to
(36) To be profitable,financial institutions must overcome the adverse selection and moral hazard problems that make loan defaults ________.
(46) A bank manager concerned about interest income who expects interest rates to fall and who knows the bank currently has a positive gap should ________ rate-sensitive assets and ________ rate-sensitive liabilities.
(31) 
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