Duration Is a Less Accurate Predictor for the Change in an FI's

question 17

Multiple Choice

Duration is a less accurate predictor for the change in an FI's net worth in case of large interest rate shocks because it assumes a:

• A)linear relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is convex
• B)linear relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is concave
• C)convex relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is linear
• D)concave relationship between the change in an asset or liability's price and the change in the interest rate, while the true relationship is linear

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Definitions:

Human Factors Psychologist

A psychologist focusing on how people interact with products, systems, and environments to improve usability and performance.

Distractions

Interruptions that divert an individual's attention from the intended focus.

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The action of leading a group of people or an organization, or the ability to do this.

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