1.If interest rates fall, a liability-sensitive bank will experience its net interest margin to:

a.Rise.

b.Fall.

c.Depends upon the relative rise in interest rates.

d.Have no effect.

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2.A negative Relative IS Gap ratio means the financial institution:

a.Has an interest-sensitive ratio of more than 1.0.

b.Is Asset-sensitive.

c.Is Liability-sensitive.

d.Has an interest-sensitive ratio equal to 1.0.

3. In a declining market interest rate environment, bank management's most likely action will be to:

a.Decrease interest-sensitive assets.

b.Increase interest-sensitive liabilities.

c.Increase interest-sensitive assets.

d.Either or both (a) and/or (b).

4. Which one of the following is not an example of repriceable interest-sensitive asset?

a.Cash.

b.Variable rate loans.

c.Short-term securities.

Federal funds sold