When maturities of liabilities and assets are mismatched and risk incurred by financial intermediaries then this risk is classified as _____________?
Correct answer: A. interest rate risk
- A. interest rate risk
- B. channel rate risk
- C. economic risk
- D. issuance risk
Explanation
A maturity mismatch exposes a financial intermediary to interest rate risk because changes in rates can affect the costs of liabilities differently from the returns on assets. The other options are not standard names for this mismatch risk.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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