When Does "Duration" Become a Less Accurate Predictor of Expected

question 112

Multiple Choice

When does "duration" become a less accurate predictor of expected change in security prices?

• A)As interest rate shocks increase in size.
• B)As interest rate shocks decrease in size.
• C)When maturity distributions of an FI's assets and liabilities are considered.
• D)As inflation decreases.

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Definitions:

Perpetual Inventory System

An accounting technique that utilizes computerized point-of-sale systems and enterprise asset management software to immediately record inventory transactions upon sale or purchase.

Merchandise

Goods or products that are bought and sold in retail or wholesale in the business.

Sales Discounts

Reductions in the selling price offered to customers, often as an incentive to encourage prompt payment.

Cash Discount

A deduction from the total amount on an invoice allowed by a vendor to encourage prompt payment.