Question

1-The financial crisis of 2008, demonstrated that activities such as trading in financial futures and interest rates swaps have low risk. True or false?

2-Off balance sheet activities consist of issuing financial instruments such as various types of garantees and engaging in derivative trading to generate additional revenue. True or false?

3- State chartered bank ————-be members of the federal reserve system and and nationally chartered banks ————be members of the federal reserve system

A-must, may. B-must, must. C- may, may. D-may, must

4-An example of off balance sheet activities include: A- purchasing a futures contract B-borrowing from another bank C- lending money to a depositor D- all of these choices are correct

Answer 1

1. False

The financial crisis of 2008 infact depicted that trading in derivatives and swaps have high risk. Interest rate risk is significant because the interest rates are volatile and fluctuate a lot.

2. True

Off balance sheet activities are activities that do not create assets or liabilities which appear on the balance sheet. Issuing financial instruments such as guarantees and engaging in derivative trading are considered off balance sheet activities.

3.May must

The state Chartered Bank has an option of becoming a member of the Federal Reserve system while the nationally chartered banks are required to be a member of the Federal Reserve system.

4: A- purchasing a futures contract

Trading in derivatives is considered an off balance sheet activity.