Multiple Choice
What is the interest rate risk exposure of the optimal transaction in the previous question over the next 2 years?
A) The risk that interest rates will rise since the FI must purchase a 2-year CD in one year.
B) The risk that interest rates will rise since the FI must sell a 1-year CD in one year.
C) The risk that interest rates will fall since the FI must sell a 2-year loan in one year.
D) The risk that interest rates will fall since the FI must buy a 1-year loan in one year.
E) There is no interest rate risk exposure. [Refer to: 9-95]
Correct Answer:
Verified
Correct Answer:
Verified
Q106: A relatively high numerical value of the
Q107: The leverage adjusted duration of a typical
Q108: Suppose a pension fund must have $10,000,000
Q109: If the relative change in interest rates
Q110: Consider a one-year maturity, $100,000 face value
Q112: Calculate the leverage-adjusted duration gap to four
Q113: What is the leverage-adjusted duration gap?<br>A)0.605 years.<br>B)0.956
Q114: Attempts to satisfy the objectives of shareholders
Q115: Buying a fixed-rate asset whose duration is
Q116: What is the price of the bond