388 $
© 2014 Pearson Canada Inc.$
Because of an expected rise in interest rates in the future, a banker will likely ____.
A) make long-term rather than short-term loans
B) buy short-term rather than long-term bonds
C) buy long-term rather than short-term bonds
D) make either short or long-term loans; expectations of future interest rates are irrelevant
Answer: B
Diff: 3 Type: MC Page Ref: 316
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
If a banker expects interest rates to fall in the future, her best strategy for the present is
____.
A) to increase the duration of the bank's liabilities
B) to buy short-term bonds
C) to sell long-term certificates of deposit
D) to increase the duration of the bank's assets
Answer: D
Diff: 3 Type: MC Page Ref: 316
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk
Because ____ are less liquid for the depositor than ____, they earn higher interest
rates.
A) money market deposit accounts; time deposits
B) chequable deposits; savings account
C) savings account; chequable deposits
D) savings account; time deposits
Answer: C
Diff: 2 Type: MC Page Ref: 316
Skill: Recall
Objective List: 13.1 Outline a bank's sources and uses of funds
Bruce the Bank Manager can reduce interest rate risk by ____ the duration of the bank's
assets to increase their rate sensitivity or, alternatively, ____ the duration of the bank's
liabilities.
A) shortening; lengthening
B) shortening; shortening
C) lengthening; lengthening
D) lengthening; shortening
Answer: A
Diff: 3 Type: MC Page Ref: 316
Skill: Recall
Objective List: 13.3 Discuss how bank managers manage credit risk and interest-rate risk