NHTM - CHAPTER 7

Usually the principal goal of asset-liability management is to maximize or at least stabilize a bank's margin or spread.

• TRUE

• FALSE

Asset management strategy in banking assumes that the amount and kinds of deposits and other borrowed funds a bank attracts are determined largely by its management.

• FALSE

• TRUE

The ultimate goal of liability management is to gain control over a financial institution's sources of funds.

• FALSE

• TRUE

If interest rates fall when a bank is in an asset-sensitive position its net interest margin will rise.

• TRUE

• FALSE

A liability-sensitive bank will experience an increase in its net interest margin if interest rates rise.

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• FALSE

Under the so-called liability management view in banking the key control lever banks possess over the volume and mix of their liabilities is price.

• FALSE

• TRUE

Under the so-called funds management view bank management's control over assets must be coordinated with its control over liabilities so that asset and liability management are internally consistent.

• TRUE

• FALSE

Bankers cannot determine the level or trend of market interest rates; instead, they can only react to the level and trend of rates.

• FALSE

• TRUE

Short-term interest rates tend to rise more slowly than long-term interest rates and to fall more slowly when all interest rates in the market are headed down.

• FALSE

• TRUE

A financial institution is liability sensitive if its interest-sensitive liabilities are less than its interest-sensitive assets.

• TRUE

• FALSE