31. For a bank that has a positive duration gap, a decrease in interest rates will cause a(n) _______ in the economic value of assets, a(n) _______ in the economic value of liabilities, and a(n) _______ in the economic value of equity.a.increase, decrease, increaseb.increase, increase, decreasec.increase, increase, increased.decrease, decrease, increasee.decrease, increase, decrease32. For a bank that has a negative duration gap, an increase in interest rates will cause a(n) _______ in the economic value of assets, a(n) _______ in the economic value of liabilities, and a(n) _______ in the economic value of equity.33. For a bank that has a positive duration gap, an increase in interest rates will cause a(n) _______ in the economic value of assets, a(n) _______ in the economic value of liabilities, and a(n) _______ in the economic value of equity.34. To perfectly immunize a bank’s economic value of equity from changes in interest rate risk, itshould:35. Which of the following will notaffect a bank’s duration estimate for the year?a.Prepayments on loans that exceed expectations.b.A 20-year corporate bond that is unexpectedly called in 6 months.c.Certificates of deposit that are withdrawn early.d.Holding a 30-year Treasury bond until maturity.e.All of the above will affect a bank’s estimated duration for the year.36. What is the strength of static GAP analysis relative to duration gap analysis?

37. What are the weaknesses of using static GAP analysis versus duration gap analysis?a. and b.

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- Spring '11
- Batoul
- Interest Rates, Bond duration, duration, Zero-coupon bond, duration gap