Measuring the Sensitivity of Bank Profits to Changes in Interest

question 29

Multiple Choice

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.

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Definitions:

Net Operating Income

A financial metric that calculates a company’s income after operating expenses are subtracted but before interest and taxes are deducted.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels of the business, allowing for more accurate financial planning.

Total Expenses

The sum of all costs and expenditures that a company incurs in a specific period, including operating and non-operating expenses.

Planning Budget

An estimate of the income and expenses that a company anticipates over a period, factoring in various operational objectives.