商業(yè)銀行管理彼得S.羅斯英文原書第8版-英語試題庫Chap007

Chapter7

RiskManagementforChangingInterestRates:Asset-LiabilityManagementandDurationTechniques

FillintheBlankQuestions

1. The___________________viewofassetsandliabilitiesheldthattheamountandtypesofdepositswasprimarilydeterminedbycustomersandhencethekeydecisionabankneededtomakewaswiththeassets.

Answer:assetmanagement

2. Recentdecadeshaveusheredindramaticchangesinbanking.Thegoalof__________________wassimplytogaincontrolofthebank'ssourcesoffunds.

Answer:liabilitymanagement

3. The__________________________istheinterestratethatequalizesthecurrentmarketpriceofabondwiththepresentvalueofthefuturecashflows.

Answer:yieldtomaturity(YTM)

4. The__________________riskpremiumonabondallowstheinvestortobecompensatedfortheirprojectedlossinpurchasingpowerfromtheincreaseinthepricesofgoodsandservicesinthefuture.

Answer:inflation

5. The__________________showstherelationshipbetweenthetimetomaturityandtheyieldtomaturityofabond.Itisusuallyconstructedusingtreasurysecuritiessincetheyareassumedtohavenodefaultrisk.

Answer:yieldcurve

6. The__________________riskpremiumonabondreflectsthedifferencesintheeaseandabilitytosellthebondinthesecondarymarketatafavorableprice.

Answer:liquidity

7. __________________________arethoseassetswhichmatureormustberepricedwithintheplanningperiod.

Answer:Interest-sensitiveassets

8. __________________________isthedifferencebetweeninterest-sensitiveassetsandinterest-sensitiveliabilities.

Answer:Dollarinterest-sensitivegap

9. A(n)__________________________meansthatthebankhasmoreinterest-sensitiveliabilitiesthaninterest-sensitiveassets.

Answer:negativeinterest-sensitivegap(liabilitysensitive)

10. Thebank's__________________________takesintoaccounttheideathatthespeed(sensitivity)ofinterestratechangeswilldifferfordifferenttypesofassetsandliabilities.

Answer:weightedinterest-sensitivegap

11. __________________________isthecoordinatedmanagementofboththebank'sassetsanditsliabilities.

Answer:Fundsmanagement

12. __________________________istheriskduetochangesinmarketinterestrateswhichcanadverselyaffectthebank'snetinterestmargin,assetsandequity.

Answer:Interestraterisk

13. The__________________________istherateofreturnonafinancialinstrumentusinga360dayyearrelativetotheinstrument'sfacevalue.

Answer:bankdiscountrate

14. The__________________________componentofinterestratesistheriskpremiumduetotheprobabilitythattheborrowerwillmisssomepaymentsorwillnotrepaytheloan.

Answer:defaultriskpremium

15. __________________istheweightedaveragematurityforastreamoffuturecashflows.Itisadirectmeasureofpricerisk.

Answer:Duration

16. __________________________isthedifferencebetweenthedollar-weighteddurationoftheassetportfolioandthedollar-weighteddurationoftheliabilityportfolio.

Answer:Durationgap

17. A(n)__________________________durationgapmeansthatforaparallelincreaseinallinterestratesthemarketvalueofnetworthwilltendtodecline.

Answer:positive

18. A(n)__________________________durationgapmeansthatforaparallelincreaseinallinterestratesthemarketvalueofnetworthwilltendtoincrease.

Answer:negative

19. The__________________referstotheperiodicfluctuationsinthescaleofeconomicactivity.

Answer:businesscycle

20. The__________________________isequaltothedurationofeachindividualtypeofassetweightedbythedollaramountofeachtypeofassetoutofthetotaldollaramountofassets.

Answer:durationoftheassetportfolio

21. The__________________________isequaltothedurationofeachindividualtypeofliabilityweightedbythedollaramountofeachtypeofassetoutofthetotaldollaramountofassets.

Answer:durationoftheliabilityportfolio

22. Abankis__________________againstchangesinitsnetworthifitsdurationgapisequaltozero.

Answer:immunized(insulatedorprotected)

23. Therelationshipbetweenachangeinanasset'spriceandanasset’schangeintheyieldorinterestrateiscapturedby__________________________.

Answer:convexity

24. Thechangeinafinancialinstitution's__________________isequaltodifferenceinthedurationoftheassetsandliabilitiestimesthechangeintheinterestratedividedbythestartinginterestratetimesthedollaramountoftheassetsandliabilities.

Answer:networth

25. Whenabankhasapositivedurationgapaparallelincreaseintheinterestratesontheassetsandliabilitiesofthebankwillleadtoa(n)__________________inthebank'snetworth.

Answer:decrease

26. Whenabankhasanegativedurationgapaparalleldecreaseintheinterestratesontheassetsandliabilitiesofthebankwillleadtoa(n)_________________________inthebank'snetworth.

Answer:decrease

27. U.S.bankstendtodobetterwhentheyieldcurveisupward-slopingbecausetheytendtohave____________maturitygappositions.

Answer:positive

Onegovernment-createdgiantmortgagebankingfirmswhichhavesubsequentlybeenprivatizedisthe.

Answer:FNMAorFannieMae(orFHLMCorFreddieMac)

Onepartofinterestrateriskis.Thispartofinterestrateriskreflectsthatasinterestratesrise,pricesofsecuritiestendtofall.

Answer:pricerisk

Onepartofinterestrateriskis.Thispartofinterestrateriskreflectsthatasinterestratesfall,anycashflowsthatarereceivedbeforematurityareinvestedatalowerinterestrate.

Answer:reinvestmentrisk

Whenaborrowerhastherighttopayoffaloanearlywhichreducedthelender’sexpectedrateofreturnitiscalled.

Answer:callrisk

Inrecentdecades,bankshaveaggressivelysoughttoinsulatetheirassetsandliabilityportfoliosandprofitsfromtheravagesifinterestratechanges.Manybanksnowconducttheirasset-liabilitymanagementstrategywiththehelpofanwhichoftenmeetsdaily.

Answer:asset-liabilitycommittee

isinterestincomefromloansandinvestmentslessinterestexpensesondepositsandborrowedfundsdividedbytotalearningassets.

Answer:Netinterestmargin(NIM)

arethoseliabilitiesthatwhichmatureormustberepricedwithintheplanningperiod.

Answer:Interest-sensitiveliabilities

Variablerateloansandsecuritiesareincludedaspartofforbanks.

Answer:repriceableassets

Moneymarketdepositsareincludedaspartofforbanks.

Answer:repriceableliabilities

Interestsensitiveassetslessinterestsensitiveliabilitiesdividedbytotalassetsofthebankisknownas.

Answer:relativeinterestsensitivegap

Interestsensitiveassetsdividedbyinterestsensitiveliabilitiesisknownas.

Answer:Interestsensitivityratio

isameasureofinterestrateexposurewhichisthetotaldifferenceindollarsbetweenthoseassetsandliabilitiesthatcanberepricedoveradesignatedtimeperiod.

Answer:Cumulativegap

isthephenomenonthatinterestratesattachedtovariousassetsoftenchangebydifferentamountsandatdifferentspeedsthaninterestratesattachedtovariousliabilities,

Answer:basisrisk

True/FalseQuestions

T F 41. Usuallytheprincipalgoalofasset-liabilitymanagementistomaximizeoratleaststabilizeabank'smarginorspread.

Answer:True

T F 42. Assetmanagementstrategyinbankingassumesthattheamountandkindsofdepositsandotherborrowedfundsabankattractsaredeterminedlargelybyitsmanagement.

Answer:False

T F 43. Theultimategoalofliabilitymanagementistogaincontroloverafinancialinstitution'ssourcesoffunds.

Answer:True

T F 44. Ifinterestratesfallwhenabankisinanasset-sensitivepositionitsnetinterestmarginwillrise.

Answer:False

T F 45. Aliability-sensitivebankwillexperienceanincreaseinitsnetinterestmarginifinterestratesrise.

Answer:False

T F 46. Undertheso-calledliabilitymanagementviewinbankingthekeycontrolleverbankspossessoverthevolumeandmixoftheirliabilitiesisprice.

Answer:True

T F 47. Undertheso-calledfundsmanagementviewbankmanagement'scontroloverassetsmustbecoordinatedwithitscontroloverliabilitiessothatassetandliabilitymanagementareinternallyconsistent.

Answer:True

T F 48. Bankerscannotdeterminethelevelortrendofmarketinterestrates;instead,theycanonlyreacttothelevelandtrendofrates.

Answer:True

T F 49. Short-terminterestratestendtorisemoreslowlythanlong-terminterestratesandtofallmoreslowlywhenallinterestratesinthemarketareheadeddown.

Answer:False

T F 50. Afinancialinstitutionisliabilitysensitiveifitsinterest-sensitiveliabilitiesarelessthanitsinterest-sensitiveassets.

Answer:False

T F 51. Ifabank'sinterest-sensitiveassetsandliabilitiesareequalthanitsinterestrevenuesfromassetsandfundingcostsfromliabilitieswillchangeatthesamerate.

Answer:True

T F 52. Bankswithapositivecumulativeinterest-sensitivegapwillbenefitifinterestratesrise,butloseincomeifinterestratesdecline.

Answer:True

T F 53. Bankswithanegativecumulativeinterest-sensitivegapwillbenefitifinterestratesrise,butloseincomeifinterestratesdecline.

Answer:False

T F 54. Formostbanksinterestratespaidonliabilitiestendtomovemoreslowlythaninterestratesearnedonassets.

Answer:False

T F 55. Interest-sensitivegaptechniquesdonotconsidertheimpactofchanginginterestratesonstockholdersequity.

Answer:True

T F 56. Interest-sensitivegap,relativeinterest-sensitivegapandtheinterest-sensitivityratiowilloftenreachdifferentconclusionsastowhetherthebankisassetorliabilitysensitive.

Answer:False

T F 57. Theyieldcurveisconstructedusingcorporatebondswithdifferentdefaultriskssothebankcandeterminetherisk/returntradeofffordefaultrisk.

Answer:False

T F 58. Financialsecuritiesthatarethesameinallotherwaysmayhavedifferencesininterestratesthatreflectthedifferencesintheeaseofsellingthesecurityinthesecondarymarketatafavorableprice.

Answer:True

T F 59. Financialinstitutionsfacetwomajorkindsofinterestraterisk.Theserisksincludepriceriskandreinvestmentrisk.

Answer:True

T F 60. Interest-sensitivegapandweightedinterest-sensitivegapwillalwaysreachthesameconclusionastowhetherabankisassetsensitiveorliabilitysensitive.

Answer:False

T F 61. Weightedinterest-sensitivegapislessaccuratethaninterest-sensitivegapindeterminingtheaffectofchangesininterestratesonnetinterestmargin.

Answer:False

T F 62. Abankwithapositivedurationgapexperiencingariseininterestrateswillexperienceanincreaseinitsnetworth.

Answer:False

T F 63. Abankwithanegativedurationgapexperiencingariseininterestrateswillexperienceanincreaseinitsnetworth.

Answer:True

T F 64. Durationisadirectmeasureofthereinvestmentriskofabond.

Answer:False

T F 65. Abankwithapositivedurationgapexperiencingadecreaseininterestrateswillexperienceanincreaseinitsnetworth.

Answer:True

T F 66. Abankwithanegativedurationgapexperiencingadecreaseininterestrateswillexperienceanincreaseinitsnetworth.

Answer:False

T F 67. Durationistheweightedaveragematurityofapromisedstreamoffuturecashflows.

Answer:True

T F 68. Durationisadirectmeasureofthepriceriskofabond.

Answer:True

T F 69. Abondwithagreaterdurationwillhaveasmallerpricechangeinpercentagetermswheninterestrateschange.

Answer:False

T F 70. Long-terminterestratestendtochangeverylittlewiththecycleofeconomicactivity.

Answer:True

T F 71. Abankwithadurationgapofzeroisimmunizedagainstchangesinthevalueofnetworthduetochangesininterestratesinthemarket.

Answer:True

T F 72. Convexityistheideathattherateofchangeofanasset'spricevarieswiththelevelofinterestrates.

Answer:True

T F 73. Thechangeinthemarketpriceofanasset'spricefromachangeinmarketinterestratesisroughlyequaltotheasset'sdurationtimesthechangetheinterestratedividedbytheoriginalinterestrate.

Answer:True

T F 74. U.S.bankstendtodobetterwhentheyieldcurveisupward-sloping.

Answer:True

T F 75. NetinterestmargintendstoriseforU.S.bankswhentheyieldcurveisupward-sloping.

Answer:True

T F 76. Financialinstitutionsladenwithhomemortgagestendbeimmunetointerest-raterisk.

Answer:False

T F 77. IfaFinancialInstitution'snetinterestmarginisimmunetointerest-rateriskthensoisitsnetworth.

Answer:False

MultipleChoiceQuestions

Whenisinterestrateriskforabankgreatest?

Wheninterestratesarevolatile.

Wheninterestratesarestable.

Wheninflationishigh.

Wheninflationislow.

Whenloandefaultsarehigh.

Answer:A

Abank’sISGAPisdefinedas:

Thedollaramountofrate-sensitiveassetsdividedbythedollaramountofrate-sensitiveliabilities.

Thedollaramountofearningassetsdividedbythedollaramountoftotalliabilities.

Thedollaramountofrate-sensitiveassetsminusthedollaramountofrate-sensitiveliabilities.

Thedollaramountofrate-sensitiveliabilitiesminusthedollaramountofrate-sensitiveassets.

Thedollaramountofearningassetstimestheaverageliabilityinterestrate.

Answer:C

Accordingtothetextbook,thematuringoftheliabilitymanagementtechniques,coupledwithmorevolatileinterestrates,gavebirthtothe__________________approachwhichdominatesbankingtoday.Thetermthatcorrectlyfillsintheblankintheprecedingsentenceis:

A) Liabilitymanagement

B) Assetmanagement

C) Riskmanagement

D) Fundsmanagement

E) Noneoftheabove.

Answer:D

Theprincipalgoalofinterest-ratehedgingstrategyistoholdfixedabank's:

A) Netinterestmargin

B) Netincomebeforetaxes

C) Valueofloansandsecurities

D) Noninterestspread

E) Noneoftheabove.

Answer:A

Abankisassetsensitiveifits:

A) Loansandsecuritiesareaffectedbychangesininterestrates.

B) Interest-sensitiveassetsexceeditsinterest-sensitiveliabilities.

C) Interest-sensitiveliabilitiesexceeditsinterest-sensitiveassets.

D) Depositsandborrowingsareaffectedbychangesininterestrates.

E) Noneoftheabove.

Answer:B

Thechangeinabank'snetincomethatoccursduetochangesininterestratesequalstheoverallchangeinmarketinterestrates(inpercentagepoints)times_____________.Thechoicebelowthatcorrectlyfillsintheblankintheprecedingsentenceis:

A) Volumeofinterest-sensitiveassets

B) Priceriskofthebank'sassets

C) Priceriskofthebank'sliabilities

D) Sizeofthebank'scumulativegap

E) Noneoftheabove.

Answer:D

Abankwithanegativeinterest-sensitiveGAP:

A) Hasagreaterdollarvolumeofinterest-sensitiveliabilitiesthaninterest-sensitiveassets.

B) Willgenerateahigherinterestmarginifinterestratesrise.

C) Willgenerateahigherinterestmarginifinterestratesfall.

D) AandB.

E) AandC.

Answer:E

Thenetinterestmarginofabankisinfluencedby:

A) Changesinthelevelofinterestrates.

B) Changesinthevolumeofinterest-bearingassetsandinterest-bearingliabilities.

C) Changesinthemixofassetsandliabilitiesinthebank'sportfolio.

D) Alloftheabove.

E) AandBonly.

Answer:D

Thediscountratethatequalizesthecurrentmarketvalueofaloanorsecuritywiththeexpectedstreamoffutureincomepaymentsfromthatloanorsecurityisknownasthe:

A) Bankdiscountrate

B) Yieldtomaturity

C) Annualpercentagerate(APR)

D) Add-oninterestrate

E) Noneoftheabove.

Answer:B

Theinterest-ratemeasureoftenquotedonshort-termloansandmoneymarketsecuritiessuchasU.S.Treasurybillsisthe:

A) Bankdiscountrate

B) Yieldtomaturity

C) Annualpercentagerate(APR)

D) Add-oninterestrate

E) Noneoftheabove

Answer:A

Abankwhoseinterest-sensitiveassetstotal$350millionanditsinterest-sensitiveliabilitiesamountto$175millionhas:

A) Anasset-sensitivegapof525million

B) Aliability-sensitivegapof$175million

C) Anasset-sensitivegapof$175million

D) Aliability-sensitivegapof$350million

E) Noneoftheabove.

Answer:C

Abankhasa1-year$1,000,000loanoutstanding,payableinfourequalquarterlyinstallments.Whatdollaramountoftheloanwouldbeconsideredratesensitiveinthe0–90daybucket?

$0

$250,000

$500,000

$750,000

$1,000,000

Answer:B

AbankhasFederalfundstotaling$25millionwithaninterestratesensitivityweightof1.0.Thisbankalsohasloansof$105millionandinvestmentsof$65millionwithinterestratesensitivityweightsof1.40and1.15respectively.Thisbankalsohas$135millionininterest-bearingdepositswithaninterestratesensitivityweightof.90andothermoneymarketborrowingsof$75millionwithaninterestratesensitivityweightof1.0.Whatistheweightedinterest-sensitivegapforthisbank?

A) $50.25

B) $-15

C) -$50.25

D) $34.25

E) Noneoftheabove

Answer:A

Abondhasafacevalueof$1000andfiveyearstomaturity.Thisbondhasacouponrateof13percentandissellinginthemarkettodayfor$902.Couponpaymentsaremadeannuallyonthisbond.Whatistheyieldtomaturity(YTM)forthisbond?

A) 13%

B) 12.75%

C) 16%

D) 11.45%

E) Cannotbecalculatedfromtheinformationgiven

Answer:C

Atreasurybillcurrentlysellsfor$9,845,hasafacevalueof$10,000andhas46daystomaturity.Whatisthebankdiscountrateonthissecurity?

A) 12.49%

B) 12.13%

C) 12.30%

D) 2%

E) Noneoftheabove

Answer:B

The_______________isdeterminedbythedemandandsupplyforloanablefundsinthemarket.Thetermthatcorrectlyfillsintheblankintheprecedingsentenceis:

A) Theyieldtomaturity

B) Thebanker'sdiscountrate

C) Theholdingperiodreturn

D) Therisk-freerealrateofinterest

E) Themarketrateofinterestonariskyloan

Answer:D

Abankwithapositiveinterest-sensitivegapwillhaveadecreaseinnetinterestincomewheninterestratesinthemarket:

A) Rise

B) Fall

C) Staythesame

D) Abankwithapositiveinterest-sensitivegapwillneverhaveadecreaseinnetinterestincome

Answer:B

Thefactthataconsumerwhopurchasesaparticularbasketofgoodsfor$100todayhastopay$105nextyearforthesamebasketofgoodsisanexampleofwhichofthefollowingrisks:

A) Inflationrisk

B) Defaultrisk

C) Liquidityrisk

D) Pricerisk

E) Maturityrisk

Answer:A

AbankhasFederalFundstotaling$25millionwithaninterestratesensitivityweightof1.0.Thisbankalsohasloansof$105millionandinvestmentsof$65millionwithinterestratesensitivityweightsof1.40and1.15respectively.Thisbankalsohas$135millionininterest-bearingdepositswithaninterestratesensitivityweightof.90andothermoneymarketborrowingsof$75millionwithaninterestratesensitivityweightof1.0.Whatisthedollarinterest-sensitivegapforthisbank?

A) $50.25

B) $-15

C) -$50.25

D) $34.25

E) Noneoftheabove

Answer:B

IfabankhasapositiveGAP,anincreaseininterestrateswillcauseinterestincometo__________,interestexpenseto__________,andnetinterestincometo__________.

Increase,increase,increase

Increase,decrease,increase

Increase,increase,decrease

Decrease,decrease,decrease

Decrease,increase,increase

Answer:A

IfabankhasanegativeGAP,adecreaseininterestrateswillcauseinterestincometo__________,interestexpenseto__________,andnetinterestincometo__________.

Increase,increase,increase

Increase,decrease,increase

Increase,increase,decrease

Decrease,decrease,decrease

Decrease,decrease,increase

Answer:E

Atreasurybillcurrentlysellsfor$9,845,hasafacevalueof$10,000andhas46daystomaturity.Whatistheyieldtomaturityonthissecurity?

A) 12.49%

B) 12.13%

C) 12.30%

D) 2%

E) Noneoftheabove

Answer:A

TheThirdNationalBankofEdmondreportsanetinterestmarginof5.83%.Ithastotalinterestrevenuesof$275millionandtotalinterestexpensesof$210million.Whatdoesthisbank'searningsassetshavetobe?

A) $4717million

B) $3602million

C) $1115million

D) $3.790million

E) Noneoftheabove

Answer:C

TheThirdNationalBankofEdmondreportsanetinterestmarginof5.83%.Ithastotalinterestrevenuesof$275millionandtotalinterestexpensesof$210million.Thisbankhasearningsassetsof$1115.Supposethisbank'sinterestrevenuesriseby8percentanditsinterestexpensesandearningsassetsriseby10percentnextyear.Whatisthisbank'snewnetinterestmargin?

A) 5.83%

B) 7.09%

C) 3.59%

D) 5.38%

E) 7.80%

Answer:D

Whichofthefollowingispartoffundsmanagement?

A) Thegoaloffundsmanagementissimplytogaincontroloverthebank'sfundssources.

B) Sincetheamountofdepositsabankholdsisdeterminedlargelybyitscustomers,thefocusofthebankshouldbeonmanagingtheassetsofthebank.

C) Managementofthebank'sassetsmustbecoordinatedwithmanagementofthebank'sliabilities.

D) Thespreadbetweeninterestrevenuesandinterestexpensesisunimportant.

E) Noneoftheabove

Answer:C

IfFifthNationalBank'sassetdurationexceedsitsliabilitydurationandinterestratesrise,thiswilltendto__________________themarketvalueofthebank'snetworth.

A) Lower

B) Raise

C) Stabilize

D) Notaffect

E) Noneoftheabove

Answer:A

IfMainStreetBankhas$100millionincommercialloanswithanaveragedurationof0.40years;$40millioninconsumerloanswithanaveragedurationof1.75years;and$30millioninU.S.Treasurybondswithanaveragedurationof6years,whatisMainStreet'sassetportfolioduration?

A) 0.4years

B) 1.7years

C) 2.7years

D) 4.1years

E) Noneoftheabove

Answer:B

Abankhasanaverageassetdurationof4.7yearsandanaverageliabilitydurationof3.3years.Thisbankhas$750millionintotalassetsand$500millionintotalliabilities.Thisbankhas:

A) Apositivedurationgapof8.0years.

B) Anegativedurationgapof2.5years.

C) Apositivedurationgapof1.4years.

D) Apositivedurationgapof2.5years.

E) Noneoftheabove.

Answer:D

Abankhasanaverageassetdurationof1.15yearsandanaverageliabilitydurationof2.70years.Thisbankhas$250millionintotalassetsand$225millionintotalliabilities.Thisbankhas:

A) Anegativedurationgapof1.55years.

B) Apositivedurationgapof1.28years.

C) Anegativedurationgapof3.85years.

D) Anegativedurationgapof1.28years.

E) Noneoftheabove.

Answer:D

Thedurationofabondistheweightedaveragematurityofthefuturecashflowsexpectedtobereceivedonabond.Whichofthefollowingisatruestatementconcerningduration?

A) Thelongerthetimetomaturity,thegreatertheduration

B) Thehigherthecouponrate,thehighertheduration

C) Theshortertheduration,thegreaterthepricevolatility

D) Alloftheabovearetrue

E) Noneoftheabovearetrue

Answer:A

Abondhasadurationof7.5years.Itscurrentmarketpriceis$1125.Interestratesinthemarketare7%today.Ithasbeenforecastedthatinterestrateswillriseto9%overthenextcoupleofweeks.Howwillthisbank'spricechangeinpercentageterms?

A) Thisbond'spricewillriseby2percent.

B) Thisbond'spricewillfallby2percent.

C) Thisbond'spricewillfallby14.02percent

D) Thisbond'spricewillriseby14.02percent

E) Thisbond'spricewillnotchange

Answer:C

Abankhasanaverageassetdurationof5yearsandanaverageliabilitydurationof3years.Thisbankhastotalassetsof$500millionandtotalliabilitiesof$250million.Currently,marketinterestratesare10percent.Ifinterestratesfallby2percent(to8percent),whatisthisbank'schangeinnetworth?

A) Networthwilldecreaseby$31.81million

B) Networthwillincreaseby$31.81million

C) Networthwillincreaseby$27.27million

D) Networthwilldecreaseby$27.27million

E) Networthwillnotchangeatall

Answer:B

Abankhasanaverageassetdurationof5yearsandanaverageliabilitydurationof3years.Thisbankhastotalassetsof$500millionandtotalliabilitiesof$250million.Currently,marketinterestratesare10percent.Ifinterestratesfallby2percent(to8percent),whatisthisbank'sdurationgap?

A) 2years

B) –2years

C) 3.5years

D) –3.5years

E) Noneoftheabove

Answer:C

Abankhasanaverageassetdurationof5yearsandanaverageliabilitydurationof9years.Thisbankhastotalassetsof$1000millionandtotalliabilitiesof$850million.Currently,marketinterestratesare5percent.Ifinterestratesriseby2percent(to7percent),whatisthisbank'schangeinnetworth?

A) Networthwilldecreaseby$50.47million

B) Networthwillincreaseby$50.47million

C) Networthwilldecreaseby$240.95million

D) Networthwillincreaseby$240.95million

E) Networthwillnotchangeatall

Answer:B

Abankhasanaverageassetdurationof5yearsandanaverageliabilitydurationof9years.Thisbankhastotalassetsof$1000millionandtotalliabilitiesof$850million.Currently,marketinterestratesare5percent.Ifinterestratesriseby2percent(to7percent),whatisthisbank'sdurationgap?

A) –4years

B) 4years

C) 2.65years

D) –2.65years

E) 12.65years

Answer:D

Abankhas$100millionofinvestmentgradebondswithadurationof9.0years.Thisbankalsohas$500millionofcommercialloanswithadurationof5.0years.Thisbankhas$300millionofconsumerloanswithadurationof2.0years.Thisbankhasdepositsof$600millionwithadurationof1.0yearsandnondepositborrowingsof$100millionwithanaveragedurationof.25years.Whatisthisbank'sdurationgap?Thesearealloftheassetsandliabilitiesthisbankhas.

A) Thisbankhas