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Question
For large interest rate increases, duration _____________ the fall in security prices, and for large interest rate decreases, duration ______________ the rise in security prices.
A. overpredicts; overpredicts
B. overpredicts; underpredicts
C. underpredicts; overpredicts
D. underpredicts; underpredicts
E. none of the above
Answer
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Related questions
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What is the total amount of net fee revenue generated from the mortgages over the year?
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A _____ position in T-bond futures should be used to hedge falling interest rates and a _____ position in T-bond futures should be used to hedge falling bond prices.
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A bond portfolio manager has a $25 million market value bond portfolio with a 6-year duration. The manager believes interest rates may increase 50 basis points. Which of the following could be used to help limit his risk?
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A. I only
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The bank's one-year repricing gap is (Million $)A. $425.B. $285.C. $74.D. $140.E. $66.
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Due to convexity problems, banks are actually better off using the simpler repricing model to manage interest rate risk rather than the duration model.
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If a bank has a negative repricing gap, falling interest rates increase profitability.
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c) Loan commitments to total assets
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Explain how liquidity risk can lead to insolvency risk.
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In the absence of deposit insurance, a deposit is a _______________ to the bank's assets.A. pro rata claimB. first come/first serve claimC. full pay or no pay claimD. both A and BE. both B and C
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B. Class B
C. Class C
D. Class Z
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B. the bonds had variable interest rates.
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