If the Portfolio Manager Wants to Shorten the Bank's Asset

question 54

Multiple Choice

If the portfolio manager wants to shorten the bank's asset maturity, what type of risk is she concerned about?

• A)Credit risk.
• B)Foreign exchange rate risk.
• C)The risk of rising interest rates.
• D)The risk of falling interest rates.
• E)Default risk.

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Definitions:

Cash Flows

The inflow and outflow of cash and cash equivalents, indicating a company's financial health and liquidity.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment.

Net Present Value

The disparity between the current value of cash coming in and the current value of cash going out over a specific duration.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs from its total revenue.