The asymmetric return distribution (relatively high probability of anticipated return;lower probability of default)on risky debt exposes the FI to

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The asymmetric return distribution on risky debt indicates that the FI is exposed to credit risk. This is because there is a high probability of anticipated return, which suggests the borrower is likely to repay the loan, but there is also a lower probability of default, indicating that there is a risk of default by the borrower. Credit risk refers to the risk of loss due to a borrower's failure to make payments on a loan or otherwise meet their contractual obligations. Therefore, the FI is exposed to credit risk in this scenario. The other options, technology risk, interest rate risk, and foreign exchange risk, are not relevant in this context.

The Asymmetric Return Distribution (Relatively High Probability of Anticipated Return;lower