The best approach to measuring liquidity takes into account changes over time in both liquidity needs and sources. A financial ratio that does this consists of in period t over in period t. liquid assets and liabilities; estimated liquidity needs liquid assets; estimated liabilities estimated reserve needs; liquid assets and liabilities liabilities; estimated liquid assets Given the following information: interest sensitive assets = $300 30-day commercial paper interest sensitive liabilities = $400 90-day CDs 30-day commercial paper is 50 percent as volatile as 90-day T-bills 90-day CDs are 120 percent as volatile as 90-day T-bills Calculate the standardized gap for the bank. A. $160 B. $563 C. -$100 D. -$330 All else the same, a positive duration gap causes the liquidity of the bank to: A. Increase B. decrease C. change only when the level of interest rates is high D. change only when the level of interest rates is low If the yield curve were upward sloping, the bank could accept some interest rate risk and earn a positive interest rate spread by using: A. a negative duration gap B. a positive duration gap C. a zero duration gap D. a zero dollar gap Which of the following is NOT a problem in the use of duration gap management? A. interest rates on assets and liabilities may be perfectly correlated with changes in the level of interest rates B. interest rates on all maturities of assets normally shift up and down at different times C. the relationship between interest rate changes and bond price changes is not linear D. duration drift can occur If the duration gap is zero, then the market value of equity is _________ interest rates. A. increased due to an increase B. increased due to a decrease C. decreased due to an increase D. immunized from changes
The best approach to measuring liquidity takes into account changes over time in both liquidity needs and sources. A financial ratio that does this consists of in period t over in period t.
- liquid assets and liabilities; estimated liquidity needs
- liquid assets; estimated liabilities
- estimated reserve needs; liquid assets and liabilities
- liabilities; estimated liquid assets
Given the following information:
interest sensitive assets = $300 30-day commercial paper interest sensitive liabilities = $400 90-day CDs
30-day commercial paper is 50 percent as volatile as 90-day T-bills 90-day CDs are 120 percent as volatile as 90-day T-bills
Calculate the standardized gap for the bank.
A. $160
B. $563
C. -$100
D. -$330
All else the same, a positive duration gap causes the liquidity of the bank to:
A. Increase
B. decrease
C. change only when the level of interest rates is high
D. change only when the level of interest rates is low
If the yield curve were upward sloping, the bank could accept some interest rate risk and earn a positive interest rate spread by using:
A. a negative duration gap
B. a positive duration gap
C. a zero duration gap
D. a zero dollar gap
Which of the following is NOT a problem in the use of duration gap management?
A. interest rates on assets and liabilities may be perfectly correlated with changes in the level of interest rates
B. interest rates on all maturities of assets normally shift up and down at different times
C. the relationship between interest rate changes and
D. duration drift can occur
If the duration gap is zero, then the market value of equity is _________ interest rates.
A. increased due to an increase
B. increased due to a decrease
C. decreased due to an increase
D. immunized from changes
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