7. If a bank has a negative interest-sensitive gap, one of the possible management responses would be to:

A. lengthen asset maturities.

B. shorten liability maturities.

C. increase interest-sensitive liabilities.

D. decrease interest-sensitive assets.

E. wait for the interest rates to fall or be stable.

8. A bond has a duration of 7.5 years. Its current market price is $1,125. Interest rates in the market are 7 percent today. It has been forecasted that interest rates will rise to 9 percent over the next couple of weeks. How will the bond's price change in percentage terms?

A. The bond's price will rise by 2 percent.

B. The bond's price will fall by 2 percent.

C. The bond's price will fall by 14.02 percent.

D. The bond's price will rise by 14.02 percent.

E. The bond's price will not change.

9. A bank has an average asset duration of 5 years and an average liability duration of 3 years. This bank has total assets of $500 million and total liabilities of $250 million. Currently, market interest rates are 10 percent. If interest rates fall by 2 percent (to 8 percent), what is this bank's change in net worth?

A. Net worth will decrease by $31.81 million.

B. Net worth will increase by $31.81 million.

C. Net worth will increase by $27.27 million.

D. Net worth will decrease by $27.27 million.

E. Net worth will not change at all.