The Numbers Provided Are in Millions of Dollars and Reflect

question 55

Multiple Choice

The numbers provided are in millions of dollars and reflect market values: A risk manager could restructure assets and liabilities to reduce interest rate exposure for this example by

• A)increasing the average duration of its assets to 9.56 years.
• B)decreasing the average duration of its assets to 4.00 years.
• C)increasing the average duration of its liabilities to 6.78 years.
• D)increasing the average duration of its liabilities to 9.782 years.
• E)increasing the leverage ratio, k, to 1.

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Definitions:

Qualitative Characteristic

Attributes that contribute to the usefulness of information presented in financial statements, including relevance and reliability.

Investment Analysis

The process of evaluating an investment for profitability and risk, ultimately leading to a decision on its appropriateness.

Average Rate of Return

A financial ratio that indicates the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Liquidity

The ease with which an asset can be converted into cash without significantly affecting its price.