The Number of Futures Contracts That a Bank Will Need

question 97

Multiple Choice

The number of futures contracts that a bank will need in order to fully hedge its overall interest rate risk exposure and protect the net worth depends upon (among other factors) :

• A)the relative duration of bank assets and liabilities.
• B)the duration of the underlying security named in the futures contract.
• C)the price of the futures contract.
• D)All of the options are correct
• E)None of the options are correct

Understand the concepts of probability distributions, including identifying valid probability distributions.

Calculate standard deviation and variance for discrete random variables.

Calculate expected values for discrete random variables.

Understand and identify discrete and continuous random variables and their possible values.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for goods or services delivered or used but not yet paid for.

Short-Term Notes Receivables

Short-duration financial assets representing amounts owed to a company that must be paid within a year.

Allowance Account

An accounting practice used to create a buffer for potential future losses on receivables, also known as a provision for doubtful debts.

Gross Realizable Value

The estimated selling price of goods minus any costs associated with the completion and sale of those goods.