1. A bank with a negative interest-sensitive GAP: (A) has a great dollar volume of interest-sensitive liabilities...
Question:
1. A bank with a negative interest-sensitive GAP:
(A) has a great dollar volume of interest-sensitive liabilities than interest-sensitive assets
(B) will generate a higher interest margin if interest rates rise
(C) will generate a higher interest margin if interest rates fall
(D) A and B
(E) A and C
2.The change in a bank's net income that occurs due to changes in interest rates equals the overall change in market interest rates (in percentage points) times _________.
(A) volume of interest-sensitive assets
(B) price risk of the bank's assets
(C) price risk of the bank's liabilities
(D) size of the bank's cumulative gap
(E) none
3. The principle goal of interest-rate hedging strategy is to hold fixed a bank's:
(A) net interest margin
(B) net income before taxes
(C) value of loans and securities
(D) non-interest spread
(E) none of the above
4. When is interest rate risk for a bank greatest?
(A) when interest rates are volatile
(B) when interest rates are stable
(C) when inflation is high
(D) when inflation is low
(E) when loan defaults are high
5. According to the textbook, the maturing of the liability management techniques, coupled with more volatile interest rates, gave birth to the __________ approach which dominates banking today.
(A) liability management
(B) asset management
(C) risk management
(D) funds management
(E) none of the above
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby