386 $
© 2014 Pearson Canada Inc.$- Measuring the sensitivity of bank profits to changes in interest rates by multiplying the gap for
several maturity subintervals times the change in the interest rate is called ____.
A) basic gap analysis
B) the maturity bucket approach to gap analysis
C) the segmented maturity approach to gap analysis
D) the segmented maturity approach to interest-exposure analysis
Answer: B
Diff: 3 Type: MC Page Ref: 313
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
Assets Liabilities
Rate-sensitive $20 million $50 million
Fixed-rate $80 million $50 million
10 ) If interest rates rise by 5 percentage points, say, from 10 to 15 percent, bank profits
(measured using basic gap analysis) will ____.
A) decline by $0.5 million
B) decline by $1.5 million
C) decline by $2.5 million
D) increase by $1.5 million
Answer: B
Diff: 3 Type: MC Page Ref: 313
Skill: Applied
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
- Assuming that the average duration of its assets is five years, while the average duration of
its liabilities is three years, then a 5 percentage point increase in interest rates will cause the net
worth of First National to decline by ____ of the total original asset value.
A) 5 percent
B) 10 percent
C) 15 percent
D) 25 percent
Answer: B
Diff: 3 Type: MC Page Ref: 313
Skill: Applied
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk