8-47 What Is Spread Effect

question 7

Multiple Choice

8-47 What is spread effect?

• A)Periodic cash flow of interest and principal amortization payments on long-term assets that can be reinvested at market rates.
• B)The effect that a change in the spread between rates on RSAs and RSLs has on net interest income as interest rates change.
• C)The effect of mismatch of asset and liabilities within a maturity bucket.
• D)The premium paid to compensate for the future uncertainty in a security's value.
• E)The value of an FI to its owners.

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Definitions:

Unlimited Liability

A legal structure in which business owners are personally responsible for all of the company's debts.

Limited Partnership

A limited partnership is a form of business ownership where there are one or more general partners, who manage the business and are personally liable for its debts, and one or more limited partners, who invest money but have limited liability and do not participate in management.

Double Taxation

The imposition of taxes on the same income, asset, or financial transaction at two levels, such as corporate profits taxed at both the corporate and individual shareholder levels.

Public Corporations

Corporations owned by the government and operated for the public benefit, often subject to different regulations than private corporations.