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 the above

Question

Quizplus · Accepted Answer

Treasury bonds are considered low-risk assets, so reducing them would not typically reduce credit risk. Increasing holdings of corporate bonds, municipal bonds, or commercial loans would generally increase credit risk, not reduce it.

Banks Can Reduce Their Credit Risk by Restructuring Their Asset