If the Maturity of a Portfolio of Deposits for a Bank

question 32

Multiple Choice

If the maturity of a portfolio of deposits for a bank is longer than its portfolio of term loans,the bank is exposed to:

• A) interest rate risk.
• B) reinvestment risk.
• C) yield-to-maturity risk.
• D) systematic risk.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term liquidity and operational efficiency.

Discount Rate

In discounted cash flow analysis, it's the rate employed to calculate the present value of anticipated cash flows.

Net Present Value

The discrepancy between the current value of incoming cash and the current value of outgoing cash throughout a given timeframe.

Cash Savings

The amount of money a company or individual keeps on hand that is not invested, spent, or used in paying off debts.