Exam 5: An Overview of Assetliability Management Alm

Which of the following is the most interest sensitive and least stable source of funds?

One reason encouraging banks to take interest rate risk is their inability to make an acceptable return without taking such risk.

If a bank has a positive dollar gap and interest rates are expected to increase in the near future, the net interest margin of the bank will:

Which of the following is (are) a potential problem(s) in the use of dollar gap analysis?

All else the same, a positive duration gap causes the liquidity of the bank to:

One method of dealing with the problem of imperfect correlation of market interest rates with portfolio interest rates is the use of the standardized gap.

Which of the following is used by banks to examine its total balance sheet and income statement under a wide variety of alternative scenarios?

Which of the following is NOT one of the four phases of a normal business cycle as discussed in the text?

If a bank has a zero gap, it is using which of the following interest rate risk management strategies?

The principal purpose of asset/liability management has been to control the size of net interest income.

Duration gap analysis directly focuses on the:

Which type of asset/liability management does NOT require the ability to forecast future interest rate levels?

If a bank has more interest rate-sensitive liabilities than interest rate-sensitive assets, then it has a:

The problem of the selection of the time horizon in gap analysis can be solved to some extent by using:

The fundamental problem with traditional gap analysis is its focus on net interest income rather than on the return on assets.

If a bank has a negative dollar gap and interest rates are expected to increase in the near future, the net interest margin of the bank will:

The term structure of interest rates can change dramatically at which point in the business cycle?

Using maturity buckets create multiple gaps.

If the duration gap is positive, then increases in interest rates will have a(an) _________ effect on the value of bank equity.

Assuming a one-year horizon, a bank with an equal amount of federal funds sold and 360 day certificates of deposit issued (and no other assets or liabilities) would have a gap of zero.