Weaknesses of the Duration Gap Immunization Model Include All but Which

question 30

Multiple Choice

Weaknesses of the duration gap immunization model include all but which of the following?

• A)Continuously matching the duration of assets and liabilities can be time-consuming and costly.
• B)Duration-based predictions are always incorrect due to convexity.
• C)Duration measurement and management are more complex than the repricing model.
• D)Duration-based immunization strategies require continuous rebalancing of asset and liability durations.
• E)Duration measures only how cash flows change,not the present value of those changes.

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Definitions:

Acquisition Differential

The difference between the cost of acquiring an entity and the fair value of its identifiable net assets.

Voting Shares

Shares that give the stockholder the right to vote on matters of corporate policy making and the election of the board of directors.

Impairment Loss

A charge recognized when the carrying amount of an asset exceeds its recoverable amount, indicating a permanent reduction in the valuation of a company's asset.

Consolidated Balance Sheet

A financial statement showing the total assets, liabilities, and shareholders' equity of a parent company and its subsidiaries as if they were a single entity.