Exam 7: Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques

A(n)__________________________ gap means that for a parallel increase in all interest rates,the market value of net worth will tend to increase.

Interest sensitive assets less interest sensitive liabilities divided by total assets of the bank is known as _______________________.

Carter National Bank is worried because it knows that the municipal bonds it has in its bond portfolio can be difficult to sell quickly.What type of risk would this be an example of?

A bond with a greater duration will have a smaller price change in percentage terms when interest rates change.

If interest rates do not change in the next 90 days,what is this bank's net interest margin?

The change in a bank's net income that occurs due to changes in interest rates equals the overall change in market interest rates (in percentage points)times ____________.

The maturing of the liability management techniques,coupled with more volatile interest rates,gave birth to the __________________ approach,which dominates banking today.

Havoc State Bank has a loan that it fears will not be repaid because the company is going into bankruptcy.What type of risk would this be an example of?

Maryellen Epplin notices that a particular T-Bill has a banker's discount rate of 9 percent in the Wall Street Journal.She knows that this T-Bill has 20 days to maturity and has a face value of $10,000. What is the yield to maturity on this T-Bill?

The _______________ is determined by the demand and supply for loanable funds in the market.

Variable rate loans and securities are included as part of _______________________ for banks.

A bank is asset-sensitive if its:

A bank is __________________ against changes in its net worth if its duration gap is equal to zero.

If interest rates fall when a bank is in an asset-sensitive position,its net interest margin will rise.

Main Street Bank has $100 million in commercial loans with an average duration of 0.40 years;$40 million in consumer loans with an average duration of 1.75 years;and $30 million in U.S.Treasury bonds with an average duration of 6 years.What will be the bank's dollar-weighted asset portfolio duration?

A bank with a negative duration gap experiencing a rise in interest rates will experience an increase in its net worth.

What is the dollar interest-sensitive gap of this bank?

Weighted interest-sensitive gap is less accurate than interest-sensitive gap in determining the effect of changes in interest rates on net interest margin.

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?

__________________________ are those assets which mature or must be repriced within the planning period.