One Reason to Exclude NOW Accounts When Estimating a Bank's

question 12

True/False

One reason to exclude NOW accounts when estimating a bank's repricing gap is because the interest rates paid on these accounts typically do not change with the level of market rates.

---

Definitions:

Futures Contract

A uniform agreement to engage in a purchase or sale at a future time, with the price established beforehand.

Foreign Exchange Exposure

The risk associated with changes in foreign exchange rates affecting the value of investments held in foreign currencies.

Derivatives

Financial instruments whose value is based on the value of another asset, such as futures, options, and swaps.

Transactions Exposure

The potential risk of value change in foreign currency transactions due to fluctuating exchange rates.