Having Longer Maturity Assets Than Liabilities Causes Banks to Bear

question 15

Multiple Choice

Having longer maturity assets than liabilities causes banks to bear which of the following risks?
I. Interest rate risk
II. Liquidity risk
III. Credit risk

• A)I only
• B)I and II only
• C)I and III only
• D)II and III only
• E)I,II,and III

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Definitions:

Variable Costing

An accounting method that includes only variable production costs in product cost, excluding fixed manufacturing overhead.

Absorption Costing

An accounting method where all of the costs associated with manufacturing a product are absorbed by the units produced.

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of production, such as rent and salaries of managers.

Fixed Manufacturing Overhead

The consistent, indirect costs associated with manufacturing that do not vary with the level of production, such as rent, insurance, and salaries of permanent staff.