Question

Please match Column (1) with Column(2) . - Credit risk - Default risk - Reputation risk - Legal risk - Interest rate risk

A. potential loss of income from delayed or nonpayment of loans, but could apply to other assets

B. A type of credit risk where the bank knows the borrower cannot pay back a loan, or where a security becomes almost worthless

C. problems that lead to the bank getting a "bad name"

D. Risk of being taken to court, or fined for non-compliance, or liability from some action (or inaction) of bank employees.

E. potential variability in income or value of a security portfolio from changes in interest rates—losses that could arise when interest rates change

Answer 1

Answer:Credit risk is the possibility of losing a lender holds due to a risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of this, measures of borrowing costs

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