A1) For a given financial institution, its Income Gap and its Duration Gap always have the opposite sign. True or False A2) Duration Gap helps find the change in a______, whereas Income Gap analysis finds the change in b______. a. expense on liability, b. income from asset b. net worth, b. asset value c. net worth, b. income from assets d. asset value, b. liability value A3) In an interest rate swap, a RSA- financial institution such as the Friendly Finance Company would swap away _a___ in favour of _b___ in a contract. (RSA:r ate sensitive assets, FRA: fixed rate assets) A . RSA, b. FRA B . FRA, b. FRA C . RSA, b. RSA D . FRA. b. RSA A4)An interest rate swap designed to reduce the level of bank interest rate risks also guarantees profits at the same time. True or False A5)An interest rate swap designed to reduce the level of bank interest rate risks involves swapping A)only the underlying principal B)both the income flow and the principal C)none D)only the flow of income on an underlying principal

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A1) For a given financial institution, its Income Gap and its Duration Gap always have the opposite sign.

True or False

A2) Duration Gap helps find the change in a______, whereas Income Gap analysis finds the change in b______.

a. expense on liability, b. income from asset

b. net worth, b. asset value

c. net worth, b. income from assets

d. asset value, b. liability value

A3) In an interest rate swap, a RSA- financial institution such as the Friendly Finance Company would swap away _a___ in favour of _b___ in a contract. (RSA:r ate sensitive assets, FRA: fixed rate assets)

A . RSA, b. FRA

B . FRA, b. FRA

C . RSA, b. RSA

D . FRA. b. RSA

A4)An interest rate swap designed to reduce the level of bank interest rate risks also guarantees profits at the same time.

True or False

A5)An interest rate swap designed to reduce the level of bank interest rate risks involves swapping

A)only the underlying principal

B)both the income flow and the principal

C)none

D)only the flow of income on an underlying principal

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