Setting the Duration of the Assets Higher Than the Duration

question 97

True/False

Setting the duration of the assets higher than the duration of the liabilities will exactly immunize the net worth of an FI from interest rate shocks.

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Definitions:

Binding Price Floors

Government-imposed price minimums that are set above the equilibrium price, causing surpluses in the market.

Binding Price Ceilings

Government-imposed price limits that are set below the market equilibrium price, leading to shortages.

Market Efficiency

A condition in which market prices fully reflect all available information and assets are priced accordingly.

Price Ceiling

A government-imposed limit on how high a price can be charged on a product or service, typically set below the equilibrium price to make goods more affordable.