Question 1

Consider the following table:   What is the one-year gap adjusted for runoffs?

Accepted Answer

A) $0 
B) $50 
C) $55 
D) $5. 
A) $0 
B) $50 
C) $55 
D) $5.

Question 2

The term 'runoffs' refers to:

Accepted Answer

A) one-off cash flow of interest and principal amortisation payments on long-term assets. 
B) periodic cash flow of interest and principal amortisation payments on long-term assets. 
C) one-off cash flow of interest and principal amortisation payments on short-term assets. 
D) periodic cash flow of interest and principal amortisation payments on short-term assets. 
A) one-off cash flow of interest and principal amortisation payments on long-term assets. 
B) periodic cash flow of interest and principal amortisation payments on long-term assets. 
C) one-off cash flow of interest and principal amortisation payments on short-term assets. 
D) periodic cash flow of interest and principal amortisation payments on short-term assets.

Question 3

In the last quarter ABC Bank reported the following repricing buckets:

Accepted Answer

The answer of In the last quarter ABC Bank reported...

Question 4

Which of the following statements is true?

Accepted Answer

A) An FI with a negative repricing gap expects interest rates to remain stable. 
B) An FI with a negative repricing gap expects interest rates to rise. 
C) An FI with a negative repricing gap expects interest rates to remain fall. 
D) An FI with a negative repricing gap has not particular expectations regarding interest rate movements. 
A) An FI with a negative repricing gap expects interest rates to remain stable. 
B) An FI with a negative repricing gap expects interest rates to rise. 
C) An FI with a negative repricing gap expects interest rates to remain fall. 
D) An FI with a negative repricing gap has not particular expectations regarding interest rate movements.

Question 5

An FI with a neutral repricing gap in its three to six month bucket is hedged against any interest rate changes at all points in time.

Accepted Answer

A) True 
 B)False

Question 6

If the spread between rate sensitive assets and rate sensitive liabilities increases for a bank, future changes in interest rates will lead to an increase in net interest income.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following repricing buckets and gaps:   What is the annualised change in the bank's future net interest income if the overnight interest rate decreased by 100 basis points?
A)-$700
B)$700
C)-$7000
D)$700

Accepted Answer

The answer of Consider the following repricing buckets and gaps:...

Question 8

Which of the following statements is false?

Accepted Answer

A) A major reason for cheque accounts to be included in an FI's interest-sensitive liabilities is that the majority of these accounts are core deposits. 
B) Cheque accounts should be treated as interest-sensitive liabilities because if interest rates rise, deposits might be withdrawn and thus will need to be replaced by higher-yielding deposits. 
C) The final decision whether or not to include cheque accounts as rate sensitive liabilities must be made after an analysis of the actual deposit history. 
D) None of the listed options are correct. 
A) A major reason for cheque accounts to be included in an FI's interest-sensitive liabilities is that the majority of these accounts are core deposits. 
B) Cheque accounts should be treated as interest-sensitive liabilities because if interest rates rise, deposits might be withdrawn and thus will need to be replaced by higher-yielding deposits. 
C) The final decision whether or not to include cheque accounts as rate sensitive liabilities must be made after an analysis of the actual deposit history. 
D) None of the listed options are correct.

Question 9

An FI with a positive gap of $30 million suffers a $0.15 million decrease in its net interest income if interest rates increase by 0.5 per cent.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is true?

Accepted Answer

A) Expressing the repricing gap as a percentage of assets tells us the direction of the interest rate exposure. 
B) Expressing the repricing gap as a percentage of liabilities tells us the scale of the interest rate exposure. 
C) Expressing the repricing gap as a percentage of equity tells us the scale of the interest rate exposure. 
D) Expressing the repricing gap as a percentage of liabilities tells us the direction of the interest rate exposure. 
A) Expressing the repricing gap as a percentage of assets tells us the direction of the interest rate exposure. 
B) Expressing the repricing gap as a percentage of liabilities tells us the scale of the interest rate exposure. 
C) Expressing the repricing gap as a percentage of equity tells us the scale of the interest rate exposure. 
D) Expressing the repricing gap as a percentage of liabilities tells us the direction of the interest rate exposure.

Question 11

The Reserve Bank of Australia's (RBA) undertook actions in regards to their open market operation in the post global financial crisis environment to move financial markets towards greater stability.This was achieved by:
A)increasing the maturity of repos to reduce money pressure in the money market over the longer term.
B)increasing RBA holdings of non-government securities for use with repos due to the shortage of government securities
C)increasing the supply of deposits held by banks and other authorised deposit-taking institutions in their exchange settlement accounts held with the RBA.
D)All of the listed options are correct.

Accepted Answer

The answer of The Reserve Bank of Australia's (RBA) undertook...

Question 12

Convexity is the major problem associated with the repricing gap.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is true?

Accepted Answer

A) One problem with the repricing gap is over-aggregation, which means that while the dollar value of asset-sensitive liabilities and assets within one bucket might be the same, the repricing timing for assets and liabilities within this bucket might differ. 
B) One problem with the repricing gap is over-aggregation, which means that managers cannot make informed decisions about interest rate movements. 
C) An advantage of the repricing gap is over-aggregation, which means that the information provided in the buckets is precise. 
D) None of the listed options are correct. 
A) One problem with the repricing gap is over-aggregation, which means that while the dollar value of asset-sensitive liabilities and assets within one bucket might be the same, the repricing timing for assets and liabilities within this bucket might differ. 
B) One problem with the repricing gap is over-aggregation, which means that managers cannot make informed decisions about interest rate movements. 
C) An advantage of the repricing gap is over-aggregation, which means that the information provided in the buckets is precise. 
D) None of the listed options are correct.

Question 14

Which of the following are rate-sensitive assets?

Accepted Answer

A) Short-term consumer loans, cheque accounts and three-month Treasury notes. 
B) Ten-year fixed rate mortgages, short-term consumer loans and long-term consumer loans. 
C) Short-term consumer loans, ten-year fixed rate mortgages and one-year term deposits. 
D) Short-term consumer loans, six-month Treasury notes and three-year 
A) Short-term consumer loans, cheque accounts and three-month Treasury notes. 
B) Ten-year fixed rate mortgages, short-term consumer loans and long-term consumer loans. 
C) Short-term consumer loans, ten-year fixed rate mortgages and one-year term deposits. 
D) Short-term consumer loans, six-month Treasury notes and three-year

Question 15

The unbiased expectations theory of the term structure of interest rates:

Accepted Answer

A) assumes that long-term interest rates are an arithmetic average of short-term rates. 
B) assumes that the yield curve reflects the market's current expectations of future short-term interest rates. 
C) recognises that forward rates are perfect predictors of future interest rates. 
D) assumes that risk premiums increase uniformly with maturity. 
A) assumes that long-term interest rates are an arithmetic average of short-term rates. 
B) assumes that the yield curve reflects the market's current expectations of future short-term interest rates. 
C) recognises that forward rates are perfect predictors of future interest rates. 
D) assumes that risk premiums increase uniformly with maturity.

Question 16

Which of the following statements is true?

Accepted Answer

A) The runoff component is rate-sensitive. 
B) The runoff component is rate-insensitive. 
C) The runoff component refers to interest payments on long-term liabilities that need to be refinanced at market rates. 
D) The run-off component refers to interest payments on short-term liabilities that need to be refinanced at market rates. 
A) The runoff component is rate-sensitive. 
B) The runoff component is rate-insensitive. 
C) The runoff component refers to interest payments on long-term liabilities that need to be refinanced at market rates. 
D) The run-off component refers to interest payments on short-term liabilities that need to be refinanced at market rates.

Question 17

The cumulative gap over the whole balance sheet by definition:

Accepted Answer

A) must be greater than zero. 
B) must be lower than zero. 
C) must equal zero. 
D) can take any value. 
A) must be greater than zero. 
B) must be lower than zero. 
C) must equal zero. 
D) can take any value.

Question 18

Consider the following repricing buckets and gaps:   What is the annualised change in the bank's future net interest income if the average rate change for assets and liabilities that can be repriced within one year is a decrease of 100 basis points?

Accepted Answer

A) $17 000 
B) -$17 000 
C) $13 000 
D) -$13 000 
A) $17 000 
B) -$17 000 
C) $13 000 
D) -$13 000

Question 19

The cumulative repricing gap position of an FI for a given extended time period is the sum of the repricing gap values for the individual time periods that make up the extended time period.

Accepted Answer

A) True 
 B)False

Question 20

When repricing all interest sensitive assets and all interest sensitive liabilities in a balance sheet, the cumulative gap will be:

Accepted Answer

A) zero. 
B) one. 
C) greater than one. 
D) a negative value. 
A) zero. 
B) one. 
C) greater than one. 
D) a negative value.

Consider the following table: What is the one-year gap adjusted for runoffs?

The term 'runoffs' refers to:

In the last quarter ABC Bank reported the following repricing buckets:

Which of the following statements is true?

An FI with a neutral repricing gap in its three to six month bucket is hedged against any interest rate changes at all points in time.

If the spread between rate sensitive assets and rate sensitive liabilities increases for a bank, future changes in interest rates will lead to an increase in net interest income.

Consider the following repricing buckets and gaps: What is the annualised change in the bank's future net interest income if the overnight interest rate decreased by 100 basis points? A)-$700 B)$700 C)-$7000 D)$700

Which of the following statements is false?

An FI with a positive gap of $30 million suffers a $0.15 million decrease in its net interest income if interest rates increase by 0.5 per cent.

Which of the following statements is true?

Convexity is the major problem associated with the repricing gap.

Which of the following statements is true?

Which of the following are rate-sensitive assets?

The unbiased expectations theory of the term structure of interest rates:

Which of the following statements is true?

The cumulative gap over the whole balance sheet by definition:

Consider the following repricing buckets and gaps: What is the annualised change in the bank's future net interest income if the average rate change for assets and liabilities that can be repriced within one year is a decrease of 100 basis points?

The cumulative repricing gap position of an FI for a given extended time period is the sum of the repricing gap values for the individual time periods that make up the extended time period.

When repricing all interest sensitive assets and all interest sensitive liabilities in a balance sheet, the cumulative gap will be:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 5: Interest Rate Risk Measurement: The Repricing Model

Consider the following table: What is the one-year gap adjusted for runoffs?

The term 'runoffs' refers to:

In the last quarter ABC Bank reported the following repricing buckets:

Which of the following statements is true?

An FI with a neutral repricing gap in its three to six month bucket is hedged against any interest rate changes at all points in time.

If the spread between rate sensitive assets and rate sensitive liabilities increases for a bank, future changes in interest rates will lead to an increase in net interest income.

Consider the following repricing buckets and gaps: What is the annualised change in the bank's future net interest income if the overnight interest rate decreased by 100 basis points? A)-$700 B)$700 C)-$7000 D)$700

Which of the following statements is false?

An FI with a positive gap of $30 million suffers a $0.15 million decrease in its net interest income if interest rates increase by 0.5 per cent.

Which of the following statements is true?

Convexity is the major problem associated with the repricing gap.

Which of the following statements is true?

Which of the following are rate-sensitive assets?

The unbiased expectations theory of the term structure of interest rates:

Which of the following statements is true?

The cumulative gap over the whole balance sheet by definition:

Consider the following repricing buckets and gaps: What is the annualised change in the bank's future net interest income if the average rate change for assets and liabilities that can be repriced within one year is a decrease of 100 basis points?

The cumulative repricing gap position of an FI for a given extended time period is the sum of the repricing gap values for the individual time periods that make up the extended time period.

When repricing all interest sensitive assets and all interest sensitive liabilities in a balance sheet, the cumulative gap will be:

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk I: Individual Loan Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters