2016-FRR Exam Dumps | An asset and liability manager for a large financial institution has to recognize that retail products

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GARP.2016-FRR.v2024-09-09.q145
Question 107

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Question 107/145

An asset and liability manager for a large financial institution has to recognize that retail products ___ include embedded options, which are often not rationally exercised, while wholesale products ___ carry penalties for repayment or include rights to terminate wholesale contracts on very different terms than are common in retail products.

A. Frequently; typically

B. Hardly ever; typically

C. Frequently; rarely

D. Hardly ever; rarely

Correct Answer: A

Retail products frequently include embedded options, such as early withdrawal options or prepayment options, which customers may not exercise rationally. In contrast, wholesale products typically carry penalties for repayment or include rights to terminate contracts on terms that are different from those in retail products.
These distinctions are important for asset and liability management because they affect the predictability and stability of cash flows.

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