What Is This Bank's Interest Rate Risk Exposure, If Any

question 21

Multiple Choice

What is this bank's interest rate risk exposure, if any?

• A)The bank is exposed to decreasing interest rates because it has a negative duration gap of -0.21 years.
• B)The bank is exposed to increasing interest rates because it has a negative duration gap of -0.21 years.
• C)The bank is exposed to increasing interest rates because it has a positive duration gap of +0.21 years.
• D)The bank is exposed to decreasing interest rates because it has a positive duration gap of +0.21 years.
• E)The bank is not exposed to interest rate changes since it is running a matched book.
• [Refer to: 9-128]

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Definitions:

Liability Accounts

Accounts on a company's balance sheet that track what the company owes to others, such as loans payable, accounts payable, and mortgage payable.