The Repricing Gap Does Not Accurately Measure FI Interest Rate

question 111

Multiple Choice

The repricing gap does not accurately measure FI interest rate risk exposure because

• A)FIs cannot accurately predict the magnitude change in future interest rates.
• B)FIs cannot accurately predict the direction of change in future interest rates.
• C)accounting systems are not accurate enough to allow the calculation of precise gap measures.
• D)it does not recognize timing differences in cash flows within the same maturity grouping.
• E)equity is omitted.

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Definitions:

Average Total Cost

The total cost divided by the quantity of output produced; a measure of cost per unit of output.

Maximum Profit

The highest possible financial gain that a firm can achieve from its operations.

Deadweight Loss

The decrease in economic performance that happens when a good or service fails to meet or cannot attain its optimal distribution point.

Marginal Cost

The cost of producing one additional unit of a good or service, considering all variable resources used in production.