When an FI pre-commits to lending at a fixed rate, it is exposed to
A)credit risk.
B)interest rate risk.
C)takedown risk.
D)funding risk.
E)exchange rate risk.

Question

Quizplus · Accepted Answer

When an FI pre-commits to lending at a fixed rate, it is exposed to interest rate risk. This is because the market interest rates may change before the loan is funded, causing the FI to potentially lose out on potential profits or income.

When an FI Pre-Commits to Lending at a Fixed Rate