Which of the following statements about a bank's behavior regarding Risk Adjusted Return on Capital
(RAROC) is correct?
I. A bank should always seek to maximize their overall RAROC.
II. A bank should consider investing in a business even with negative RAROC if it increases the RAROC of
the bank as a whole.
III. A bank should minimize its overall RAROC by controlling the absolute and relative amount of risk of its
businesses.
IV. A bank should maximize its RAROC by always investing in a new business that maximizes the RAROC
for that business unit.

Which one of the following statements describes Macauley's duration?

The exercise for an American type option prior to expiration day is virtually certain in the following case:

Which one of the following four statements correctly describes an American call option?

To estimate the interest charges on the loan, an analyst should use one of the following four formulas: