For a bank that has a positive duration gap a decrease in interest rates will

For a bank that has a positive duration gap a

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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expectations.b.A 20-year corporate bond that is unexpectedly called in 6 months.c.Certificates of deposit that are withdrawn early.d.Holding a 30-year Treasury bond until maturity.e.All of the above will affect a bank’s estimated duration for the year.36.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?
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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

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