Post Utme Lead City University 2024 Commerce Question 2

Practice objective / multiple choice question 2 from the 2024 Post Utme Lead City University Commerce examination.

Post Utme Lead City University 2024 Commerce Objective / Multiple Choice
Question 2 POST_UTME_LEAD_CITY_UNIVERSITY • 2024 • COMMERCE • objective

A bank is considering a new loan product that offers a variable interest rate tied to the prime lending rate. The bank's risk management team is concerned about the potential risks associated with this product, including the risk of interest rate volatility and the potential for borrowers to default on their loans. Which of the following is the most appropriate way for the bank to manage these risks?

Answer Options

Correct Answer A. Hedging the interest rate risk using derivatives
B. Increasing the loan-to-value ratio to reduce the risk of default
C. Requiring borrowers to make regular interest-only payments
D. Limiting the loan amount to reduce the risk of default
Correct Answer
A
Correct Option:
Hedging the interest rate risk using derivatives

About This Question

This is Post Utme Lead City University 2024 Commerce Question 2. It is one of the objective questions from the 2024 Post Utme Lead City University Commerce examination.

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