Chapter 6&7 test
1 The repricing gap model is a book value accounting bad model.
2 A positive repricing gap implies that a decrea in interest rates will cau interest expen to decrea more than the decrea in interest income.
3 When a bank’s repricing gap is positive, net interest income is positively related to changes in interest rates.
4 A bank with a negative repricing (or funding) gap faces reinvestment risk.
5 The economic meaning of duration is the interest elasticity of a financial asts price.
6 Duration considers the timing of all the cash flows of an ast by summing the product of the cash flows and the time of occurrence.
7 Duration is equal to maturity when at least some of the cash flows are received upon maturity of the ast.
8 Duration of a zero coupon bond is equal to the bond’s maturity.
9 As interest rates ri, the duration of a consol bond decreas.
10 For a given maturity fixed-income ast, duration decreas as the market yield increas.
Multiple-Choice
1 The repricing gap approach calculates the gaps in each maturity bucket by subtracting the
a. current asts from the current liabilities.
b. long term liabilities from the fixed asts.
c. rate nsitive asts from the total asts.
喇叭正露丸 d. rate nsitive liabilities from the rate nsitive asts.
e. current liabilities from tangible asts.
2 A positive gap implies that an increa in interest rates will cau _______ in net interest income.
a. no change
b. a decrea
c. an increa
d. an unpredictable change
e. Either A or B.
3 If interest rates decrea 50 basis points for an FI that has a gap of +$5 million, the expected change in net interest income is
a. + $2,500.
b. + $25,000.
c. + $250,000.
d. - $250,000.
e. - $25,000.
4 The duration of a consol bond is
a. less than its maturity.
b. infinity.
c. 30 years.
d. more than its maturity.
e. given by the formula D=1/1-R.
5 An FI has financial asts of $800 and equity of $50. If the duration of asts is 1.21 years and the duration of all liabilities is 0.25 years, what is the leverage-adjusted duration gap?
a. 0.9000 years.
b. 0.9600 years.
c. 0.9756 years.
d. 0.8844 years.
e. Cannot be determined.
6 Calculate the duration of a two-year corporate bond paying 6 percent interest annually, lling at par. Principal of $20,000,000 is due at the end of two years.
a. 2 years.
b. 1.91 years.
c. 1.94 years.
d. 1.49 years.
e. 1.75 years.
7 A $1,000 six-year Eurobond has an 8 percent coupon, is lling at par, and contracts to make annual payments of interest. The duration of this bond is 4.99 years. What will be the new price using the duration model if interest rates increa to 8.5 percent?
a. $23.10.
b. $976.90.
c. $977.23.
d. $1,023.10.
e. -$23.10.
8 Calculating modified duration involves
a. dividing the value of duration by the change in the market interest rate.
b. dividing the value of duration by 1 plus the interest rate.
c. dividing the value of duration by discounted change in interest rates.
d. multiplying the value of duration by discounted change in interest rates.
e. dividing the value of duration by the curvature effect.
Multiple Part Questions
辉映的意思U the following information to answer the next five (5) questions:
The balance sheet of XYZ Bank. All figures in millions of US Dollars.
马卡龙简笔画Asts | Liabilities和珅纪晓岚 |
1 | Short-term consumer loans (one-year maturity) | $ 150 | 1 | Equity capital (fixed) | $ 120 |
2 | Long-term consumer loans | 125 | 2 | Demand deposits (two-year maturity) | 40 |
3 | Three-month Treasury bills | 130 | 3 | Passbook savings | 130 |
女生好看壁纸4 | Six-month Treasury notes | 135 | 4 | Three-month CDs | 140 |
5 | Three-year Treasury bond | 170 | 5 | Three-month bankers acceptances | 120 |
| | | | | |
6 | 10-year, fixed-rate mortgages | 眉开眼笑的意思 120 | 6 | Six-month commercial paper | 160 |
7 | 30-year, floating-rate mortgages (rate adjusted every nine months) | 140 | 7 | One-year time deposits | 120 |
| | | 8 | Two-year time deposits | 40 |
| | $970 | | | $970 |
| | | | | |
1 Total one-year rate-nsitive asts is
a. $540 million.
b. $580 million.
c. $555 million.
d. $415 million.
e. $720 million.
2 Total one-year rate-nsitive liabilities is
a. $540 million.
b. $580 million.
c. $555 million.
d. $415 million.
e. $720 million.
3 The cumulative one-year repricing gap (CGAP) for the bank is
a. $25 million.
b. $-140 million.
c. $15 million.
d. $-150 million.
e. $-15 million.
4什么叫管理 The gap ratio is
卢敖
a. .015.
b. -.015.
c. .025.
d. -.144.
e. .154.
5 Suppo that interest rates ri by 2 percent on both RSAs and RSLs. The expected annual change in net interest income of the bank is
a. -$300,000.
b. $500,000.
c. -$2,800,000.
d. -$3,000,000.
