For a corporate borrower, it is especially important to distinguish between credit risk and repricing risk. Explain both types of risks
What will be an ideal response?
Answer: Credit risk, sometimes termed roll-over risk, is the possibility that a borrower's creditworthiness at the time of renewing a credit — its credit rating — is reclassified by the lender. This can result in changing fees, changing interest rates, altered credit line commitments, or even denial. Repricing risk is the risk of changes in interest rates charged (earned) at the time a financial contract's rate is reset. A borrower that is renewing a credit will face current market conditions on the base rate used for financing, a true floating-rate.
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Managers use the four levers of targeting elements of change to ______.
Fill in the blank(s) with the appropriate word(s).
Using the information in Table J.11 and the slack per remaining operations ratio (S/RO) rule, what is the average past due?
A) fewer than or equal to 10 hours B) greater than 10 hours but fewer than or equal to 20 hours C) greater than 20 hours but fewer than or equal to 30 hours D) greater than 30 hours