BM_Week 3

Repricing gap refers to the:

• A. difference between rate-sensitive assets and rate-sensitive liabilities.

• B. sum of rate-sensitive assets and rate-sensitive liabilities.

• C. difference between rate-sensitive liabilities and rate-sensitive assets.

• D. difference between rate-insensitive assets and rate-insensitive liabilities.

The cumulative gap over the whole balance sheet by definition:

• A. must be greater than zero.

• B. must be lower than zero.

• C. must equal zero.

• D. can take any value.

Which of the following statements is true?

• A. A negative gap indicates that a rise in interest rates would lower the bank's net interest income.

• B. A positive gap indicates that a rise in interest rates would lower the bank's net interest income.

• C. A negative gap indicates that a rise in interest rates would increase the bank's net interest income.

• D. None of the listed options are correct.

Consider the following repricing buckets and gaps

What is the annualised change in the bank's future net interest income if the overnight interest rate decreased by 100 basis points?

• -$700

• -$7000

• $700

• $7000

Which of the following statements is true?

• A. The repricing gap model is a market value accounting cash flow analysis of the repricing gap between the interest

  revenue earned on assets and the interest paid on liabilities over some period.

• B. The repricing gap model is a book value accounting cash flow analysis of the repricing gap between the interest

  revenue earned on assets and the interest paid on liabilities over some period.

• C. The repricing gap model is a market value accounting cash flow analysis of the repricing gap between the interest

  revenue earned on liabilities and the interest paid on assets over some period.

• D. The repricing gap model is a book value accounting cash flow analysis of the repricing gap between the interest

  revenue earned on liabilities and the interest paid on assets over some period.

The term core deposits refers to those deposits that:

• A. act as long-term sources of funds for the FI.

• B. reflect the true or core nature of the FI's operations.

• C. support the core of the FI's operations.

• D. None of the listed options are correct.

The term 'runoffs' refers to:

• A. one-off cash flow of interest and principal amortisation payments on long-term assets.

• B. periodic cash flow of interest and principal amortisation payments on long-term assets.

• C. one-off cash flow of interest and principal amortisation payments on short-term assets.

• D. periodic cash flow of interest and principal amortisation payments on short-term assets.

Which of the following statements is true?

• A. The cumulative repricing gap can also be expressed as a percentage of liabilities.

• B. The cumulative repricing gap can also be expressed as a percentage of equity.

• C. The cumulative repricing gap can also be expressed as a percentage of assets.

• D. None of the listed options are correct.

Which of the following statements is true?

• A. One problem with the repricing gap is over-aggregation, which means that while the dollar value of rate-sensitive

  liabilities and assets within one bucket might be the same, the repricing timing for assets and liabilities within this bucket might differ.

• B. One problem with the repricing gap is over-aggregation, which means that managers cannot make informed decisions

  about interest rate movements.

• C. An advantage of the repricing gap is over-aggregation, which means that the information provided in the buckets is

  precise.

• D. None of the listed options are correct.

The repricing gap approach calculates the gaps in each maturity bucket by subtracting the:

• A. current assets from the current liabilities.

• B. long-term liabilities from the fixed assets.

• C. rate sensitive assets from the total assets.

• D. rate sensitive liabilities from the rate sensitive assets.