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Transaction Risk

In: Business and Management

Submitted By llegette
Words 646
Pages 3
University of Phoenix Material

Week Four Individual Assignment: Financial Transaction Risks

Describe the risk exposure(s) in the following financial transactions. Identify which transactions are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!)
Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk

|Financial Transactions |Risk Type |Describe and justify risk type |Interest Rate or |
| | | |Interest Income? |
|A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year |Interest & Credit |This type of financial transaction it has an interest rate |Both, Interest Rate and|
|certificate of deposit. |Risk |risk and credit risk. The reason it is an interest rate risk |Interest Income |
| | |is because changes in an interest rate can change the value | |
| | |of an asset such as commercial loan in the financial | |
| | |transaction example. From the credit risk prospective, if | |

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