$1.$ A bank's IS GAP is defined as:a$.$ the dollar amount of interest$-$sensitive assets divided by the dollar amount of interest$-$sensitive liabilities.b$.$ the dollar amount of earning assets divided by the dollar amount of total liabilities.c$.$ the dollar amount of interest$-$sensitive assets minus the dollar amount of interest$-$sensitiveliabilities$.$d$.$ the dollar amount of interest$-$sensitive liabilities minus the dollar amount of interest$-$sensitive assets.e$.$ the dollar amount of earning assets times the average liability interest rate$\mathrm{.}2.$ A bank with a negative interest$-$sensitive GAP:a$.$ has a greater 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 lower interest margin if interest rates fall.d$.$ has assets and liabilities with the same duration.e$.$ has liabilities with a greater duration than its assets$\mathrm{.}3.$ A bank whose interest$-$sensitive assets total $$350$ million and its interest$-$sensitive liabilitiesamount to $$175$ million has:a$.$ an asset$-$sensitive gap of $$525$ million. b$.$ a liability$-$sensitive gap of $$175$ million.c$.$ an asset$-$sensitive gap of $$175$ million. d$.$ a liability$-$sensitive gap of $$350$ million.e$.$ None of the options is correct$\mathrm{.}4.$ The $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ is determined by the demand and supply for loanable funds in themarket.a$.$ coupon rate b$.$ reserve requirement c$.$ interest$-$sensitive gapd. risk$-$free real rate of interest e$.$ duration gap$5.$ The fact that a consumer who purchases a particular basket of goods for $$100$ today has to pay $$105$ next year for the same basket of goods is an example of which of the following risks?a$.$ Inflation risk b$.$ Default risk c$.$ Liquidity riskd. Price risk e$.$ Maturity risk$6.$ Financial firms devote greater attention to opening up new sources of funding and monitoring the mix and cost of their deposit and non$-$deposit liabilities under the $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ strategy.a$.$ asset management b$.$ liabilities management c$.$ interest$-$sensitive gap management d$.$weighted gap management e$.$ duration gap management$7.$ The duration of a bond is the weighted average maturity of the future cash flows expected to be received on a bond. Which of the following statements concerning duration is true?a$.$ The longer the time to maturity, the greater the duration.b$.$ The higher the coupon rate, the lower the duration.c$.$ The shorter the duration, the greater the price volatility.d$.$ All of the options are true. e$.$ None of the options is true$\mathrm{.}8.$ Which of the following statements concerning a bank's leverage$-$adjusted duration gap is true?a$.$ If it has a positive duration gap and interest rates rise, its net worth will decline.b$.$ If it has a positive duration gap and interest rates fall, its net worth will decline.c$.$ If it has a negative duration gap and interest rates rise, its net worth will decline.d$.$ If it has a negative duration gap and interest rates fall, its net worth will increase.e$.$ All of the options are correct$\mathrm{.}9.$ A bond has a face value of $$1,000$ and coupon payments of $$80$ annually. This bond matures in three years and is selling for $$1,000$ in the market. Market interest rate is $8$ percent. What is this bond's duration?a$.3$ years b$.2\mathrm{.}78$ years c$.1\mathrm{.}95$ years d$.4\mathrm{.}31$ yearse. None of the options is correct$\mathrm{.}10.$ A bond is selling in the market for $$1,100$ and has a duration of $4\mathrm{.}5$ years. Market interest rates are $5$ percent and are expected to increase to $7$ percent in the near future. What will this bond'sprice be after the change in market interest rates?a$.$ $$1,006$ b$.$ $$1,194$ c$.$ $$1,122$ d$.$ $$1,078$ e$.$ $$1,100$