Duration Bank Has the Following Assets and Liabilities as of Year-End

question 74

Multiple Choice

Duration Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. Is the bank exposed to interest rate increases or decreases and why?

• A)Interest rate increases because the value of its assets will rise more than its liabilities.
• B)Interest rate increases because the value of its assets will fall more than its liabilities.
• C)Interest rate decreases because the value of its assets will rise less than its liabilities.
• D)Interest rate decreases because the value of its assets will fall more than its liabilities.
• E)Interest rate increases because the value of its assets will fall less than its liabilities.

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Definitions:

Perceived Purchase Satisfaction

The level of contentment a customer feels regarding their decision to buy a product or service, based on their expectations and the product's performance.

Actual Product Performance

The real-life functionality and effectiveness of a product as experienced by the user, which can influence customer satisfaction and brand loyalty.

Product Perception

The way consumers view or understand a product based on its attributes, quality, and overall brand image.

Circular Relationship

An interdependent relationship where two or more elements are related in such a way that each one influences or is influenced by the others, often creating a cycle.