A Bank Has an Average Duration of Its Liabilities Equal

question 3

Multiple Choice

A bank has an average duration of its liabilities equal to 2 years. The bank's average duration of its assets is 3.5 years. The bank's market value of equity is at risk if ________.

• A) interest rates fall
• B) credit spreads fall
• C) interest rates rise
• D) the price of all fixed-income securities rises

Identify the impact of operational decisions on financial statements, including the effects on turnover ratios and working capital.

Assess the implications of financing decisions on financial ratios and company valuation.

Distinguish between the effects of various types of liabilities and equity on company's financial structure and ratios.

Evaluate the significance of earnings per share in determining a company's profitability and attractiveness to investors.

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Definitions:

Femur

The thigh bone, which is the longest, largest, and strongest bone in the human body, connecting the hip to the knee.

Olecranon Process

A bony projection of the ulna forming the point of the elbow and connecting with the triceps muscle.

Ulna

The ulna is one of the two long bones in the forearm, extending from the elbow to the smallest finger, and is located on the side opposite to the thumb.

Anterior Superior Iliac Spine

The anterior superior iliac spine (ASIS) is a bony projection on the iliac bone and serves as an important landmark in anatomy for muscle attachment and medical procedures.