Reference no: EM133117322

-Suppose you borrow RM10,000,000 in the interbank money market at a KLIBOR yield of 6% p.a for a term of 1 month.Should you buy or sell KLIBOR futures contract if you were to hedge against interest rate risks?

-What is a mismatch risk (for an IRS)?

Select one:

i. The risk that it will be difficult to find counterpart that wants to borrow the right amount of money for the right amount of time

ii. The risk that a country will impose exchange rate restrictions that will interfere with performance on the swaps

iii. Interest rates might move against the swap bank after it has only gotten half of a swap on the books, or if it has an unhedged position

iv. The major risk faced by a swap dealer - the risk that a counter party will default on its end of the swaps

-Which of the following does not relate to credit risks?

Select one:

i. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations

ii. Credit risk also describes the risk that an insurance company will be able to pay a claim.

iii. It refers to the risk that a lender may not receive the owed principal and interest

iv. Credit risk describes the risk that a bond issuer may fail to make payment when requested

v. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan