Question

1. Banks were very vulnerable to ______ risk in the mortgage loans. To protect themselves, banks began to issue _______-rate mortgages whose interest rate will increase along with market interest rates. Additionally __________ were developed to help hedge against interest-rate risk.

2. Choose three ways in which U.S. banks can become involved in international banking. a. United States banks could open a foreign branch of their bank b.A U.S. bank holding company could purchase controlling interest in a foreign bank in a foreign country c.A U.S. bank could open a Legitimate Act Corporation d.A U.S. bank could open an International Banking Facility in the U.S. which accepts time deposits from foreigners and makes loans to foreigners in the U.S. e. Foreign banks can have US executives and shareholders.

3. Credit Card date back to a. the early 1950s b.prior to the Second World War c, just after the Second World War d.late 1950s

4. Adjustable rate mortgages

   		benefit homeowners when interest rates rise.
   		allow borrowers to avoid paying interest on portions of their mortgage loans.
   		reduce the interest-rate risk for financial institutions.
   		generally have higher initial interest rates than conventional fixed-rate mortgages.

Answer 1

Banks were very vulnerable to Interest Rate risk in the mortgage loans. To protect themselves, banks began to issue Adjustable -rate mortgages whose interest rate will increase along with market interest rates. Additionally Financial Derivatives were developed to help hedge against interest-rate risk.

Choose three ways in which U.S. banks can become involved in international banking.

a. United States banks could open a foreign branch of their bank

b.A U.S. bank holding company could purchase controlling interest in a foreign bank in a foreign country

d.A U.S. bank could open an International Banking Facility in the U.S. which accepts time deposits from foreigners and makes loans to foreigners in the U.S.

Adjustable rate mortgages

reduce the interest-rate risk for financial institutions.

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