If a Rise in Interest Rates Causes the Market Value

question 62

Multiple Choice

If a rise in interest rates causes the market value of a bank's net worth to rise,then the bank must have a ________.

• A) negative duration gap
• B) positive duration gap
• C) negative gap
• D) positive gap

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Definitions:

Premium Rate

The cost rate of insurance coverage per unit of coverage, reflecting the risk and administrative costs.

Coinsurance Clause

A provision in an insurance policy that defines the split of responsibility for payment between the insurer and the insured.

Short Rate

A penalty premium amount charged when an insurance policy is terminated by the policyholder before the end of its term.

Coinsurance Clause

A provision in an insurance policy that defines the split of costs between the insurer and the insured after the deductible is met.