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

question 123

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.
• E)When the leverage adjustment is incorporated.

---

Definitions:

Region of Residence

Refers to the geographical area where an individual or population lives, often used in studies to analyze demographic, social, or health trends.

Expected Frequency

The forecasted count of occurrences in a category of a distribution, based on a probability model.

True Null Hypothesis

The proposition that there is truly no effect or difference, as opposed to the hypothesis being tested, which suggests that there might be.

Level of Risk

Indicates the potential for loss or harm which can result from a given action, activity, or decision.