Exam 14: Interest Rate Risk

Discuss the internal interest rate risk management techniques of asset and liability repricing and asset and liability portfolio restructuring.

When there are pricing differentials between markets as a result of interest rate changes or expectations,this is called _____ interest rate risk.

When a firm's funding is a mixture of short-term and long-term debt issues,it is carrying out:

Duration can be used for interest rate risk measurement.Explain how it is used.

The bundling of mortgages into a saleable security (usually for large institutional investors)is called:

Which of the following is NOT an interest-sensitive asset for a three-month planning period?

Which of the following is NOT an interest-sensitive asset for a six-month planning period?

Which of the following is NOT an external method of interest rate risk management?

When interest rates are expected to fall,an organisation will try to have a negative ARBL gap.

Duration analysis involves comparing the average duration of an organisation's _______ with the average duration of its _______.

As part of risk management when a company changes the timing of its cash outflows to minimise the effect of interest rate changes,this technique is called:

In general,all other factors held constant,the longer the time to maturity of bonds,the smaller the rate of the change of value will be.This property of coupon bonds is often referred to as:

The sensitivity of future cash flows and the value of assets and liabilities to movements in interest rates is called:

If a company has issued a fixed-interest debenture and interest rates on similar securities later fall,the value of the existing company debenture will increase.

If a bank has a duration gap of two years,a fall in interest rates from 5% to 8% per annum will lead to a/an:

Which of the following is an interest-sensitive asset for a three-month planning period?

Refer to the following table: First Nationwide Bank First Nationwide Bank Assets Liabilities Interest-sensitive \ 90 million \ 80 million Fixed-rate \ 60 million \ 40 million First Nationwide bank has a repricing gap of:

Interest rate risk occurs when:

Refer to the following table: Premier National Bank Assets Liabilities Interest-sensitive \ 60 million \ 90 million Fixed-rate \ 70 million \ 40 million If interest rates rise by 500 basis points,bank profits (measured using repricing gap analysis)will:

If interest rates are forecasted to rise,if a bank increases the interest rate it pays on its customer deposits before it has to raise its interest rates on its loans its net interest margin will improve.