Bank Z charges 8 percent interest on a loan and pays a 6 percent rate of interest on deposit, the interest rate margin is

ALM is designed to address the risk faced by banks due to a mismatch between assets and liabilities,

Bank can with 100 percent certainty predict interest rate fluctuations

Financial derivatives instruments in banks must only be used for speculative or investment purposes.

Sources of funds for a banks can be summarized into three types: capital, deposits and assets.

The assets of a banks can be classified into two broad categories: earning assets and high earning assets.

Cash on premises is an example of earning assets

Since external borrowings may be a more expensive source of funding, policy should require limited reliance on these borrowings.

Concentrated funding sources expose the banks to potential liquidity problems because of the likelihood of unexpected deposit withdrawals