Assume That the Value of Liabilities Equals That of Earning

question 47

Multiple Choice

Assume that the value of liabilities equals that of earning assets. If asset portfolio durations are ____ than liability portfolio durations, then the market value of assets are ____ interest-rate sensitive than the market value of liabilities.

• A)greater; more
• B)greater; equally
• C)greater; less
• D)less; equally
• E)B and D

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Definitions:

Rescission

The act of unilaterally terminating a contract and returning all parties involved to the positions they were in prior to entering the contract.

Pre-Approved

Describes a preliminary endorsement, often in the context of finance, indicating eligibility for certain benefits or offers without final authorization.

Death Benefit

A sum of money paid by an insurance policy or retirement plan to the beneficiary upon the death of the insured person or plan holder.

Losses

The negative financial impact that occurs when expenses exceed revenues, or due to unforeseen events or damages.