Financial Firms Devote Greater Attention to Opening Up New Sources

question 36

Multiple Choice

Financial firms devote greater attention to opening up new sources of funding and monitoring the mix and cost of their deposit and non-deposit liabilities under the _______________________ strategy.

• A)asset management
• B)liabilities management
• C)interest-sensitive gap management
• D)weighted gap management
• E)duration gap management

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Definitions:

Time Value of Money

The concept that a sum of money is worth more now than the same amount in the future due to its potential earning capacity.

Present Value

The worth today of money expected to be received in the future or sequences of cash inflows, utilizing a specific return rate.

Compound Value

The future value of an investment, including the principal and the compounded interest over time.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window. Alternatively, it can represent the rate used to discount future cash flows in present value calculations.