Treasury chap 5

can be defined as the process by which individuals, organizations, or financial institutions manage their exposure to potential losses that arise from fluctuations in interest rates.

Answer explanation

Interest Rate Risk Management

involves strategies and actions taken by individuals or organizations to effectively control, mitigate, or leverage the impact of interest rates on their financial operations.

Answer explanation

Interest rate management

This management is crucial because interest

rates influence borrowing costs, investment

returns, and overall financial health.

Answer explanation

Interest rate management

■ Defined as the cost of

borrowing money

Answer explanation

Interest

Compensation for the service

and risk of lending money

Answer explanation

Interest

Can be classified as simple

interest or compound interest

Answer explanation

Interest

The cost of borrowing money or the price paid for the rental funds, the ratio of interest to the amount lent

Answer explanation

Interest rates

Have an impact on the overall health of the economy because they affect consumers willingness to spend, save or make business investment decisions.

Answer explanation

Interest rates

requires a combination of financial

analysis, risk assessment, and strategic

decision-making tailored to individual

or organizational financial goals and

circumstances.

Answer explanation

Effective interest rate management

How interest rates are

determined?

Answer explanation

■ Supply and Demand

■ Inflation

■ Government –Monetary Policy

■ Types of loans

■ Time/ Period