Banks can reduce their credit risk by restructuring their asset portfolio to contain fewer ____ and more ____.
A)Treasury bonds; corporate bonds
B)Treasury bonds; municipal bonds
C)Treasury bonds; commercial loans
D)None of these are correct.

Question

Quizplus · Accepted Answer

Treasury bonds are generally considered to be among the safest investments because they are backed by the full faith and credit of the U.S. government. Corporate bonds, municipal bonds, and commercial loans typically carry higher credit risk compared to Treasury bonds. Therefore, restructuring a portfolio to contain fewer Treasury bonds and more of any of these other assets would not reduce credit risk.

Banks Can Reduce Their Credit Risk by Restructuring Their Asset