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Week 3 Learning Team Assignment: Financial Transaction Risks

Describe the risk exposure(s) in the following financial transactions.

Identify which transactions are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!)

Risk Types:  Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country, or sovereign risk

Financial Transactions Risk Type Describe and justify risk type Interest Rate or Interest Income?
A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificate of deposit.      
An insurance company invests its policy premiums in a long-term municipal bond portfolio.      
A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur.      
A Japanese bank acquires an Austrian bank to facilitate clearing operations.      
A bond dealer uses his own equity to buy Mexican debt on the less developed country (LDC) bond market.      
A securities firm sells a package of mortgage loans as mortgage-backed securities.      
Describe the features of the method you would choose to measure the interest risks identified.    
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