A Bank Has Liabilities of $4 Million with an Average

Multiple Choice

A bank has liabilities of $4 million with an average maturity of two years paying interest rates of 4 per cent annually. It has assets of $5 million with an average maturity of 5 years earning interest rates of 6 per cent annually. To what risk is the bank exposed?

A) reinvestment risk
B) refinancing risk
C) interest rate risk
D) refinancing risk and interest rate risk