Which one of the following conditions when combined with long-term, ﬁxed-rate, low interest loans would tend to increase the ﬁnancial risk of lending institutions the most?

Question

Quizplus · Accepted Answer

When short-term rates are volatile and high, it increases the risk for lending institutions because they may have to pay more to borrow money to lend out at a lower fixed rate. This can lead to a mismatch between the interest rates earned on loans and the interest rates paid on borrowings, which can lead to increased financial risk for the lending institution.

Which One of the Following Conditions When Combined with Long-Term