[BM] Chap9

1. In most countries FIs report their balance sheet using market value accounting.

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2. Marking-to-market accounting is a market value accounting method that reflects the purchase prices of assets and liabilities.

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• False

3. The difference between the changes in the market value of the assets and market value of liabilities for a given change in interest rates is, by definition, the change in the FI's net worth.

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• False

4. Duration measures the average life of a financial asset.

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• False

5. The economic meaning of duration is the interest elasticity of a financial assets price

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• False

5. The economic meaning of duration is the interest elasticity of a financial assets price

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• False

6. Duration considers the timing of all the cash flows of an asset by summing the product of the cash flows and the time of occurrence.

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• False

7. A key assumption of Macaulay duration is that the yield curve is flat so that all cash flows are discounted at the same discount rate.

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8. Duration is the weighted-average present value of the cash flows using the timing of the cash flows as weights.

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• False

9. In duration analysis, the times at which cash flows are received are weighted by the relative importance in present value terms of the cash flows arriving at each point in time.

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• False