Final answer:
The false statement about credit risk analysis is that covenants and fixed Federal Reserve interest rates fully protect a lender from credit risks. In reality, lenders use credit ratings, borrowing history, and additional factors to assess credit risk.
Step-by-step explanation:
The statement that is false regarding credit risk analysis is: A. A lender is protected against credit risks by a loan's covenant provisions since the interest rate is fixed by the Federal Reserve Bank. In truth, while a loan's covenants can provide some level of protection, they do not mitigate all credit risks, and the Federal Reserve does not fix interest rates for individual loans. Interest rates for borrowers are influenced by various factors, including credit ratings from private agencies like Standard and Poor's and Moody's, an individual's borrowing history, and their ability to make reliable payments. Banks also consider additional factors such as savings and other investments. Credit checks, requirements for cosigners or collateral, and analyzing sources of income are among measures taken by banks to assess creditworthiness before making a loan.