FIM Asset liability

Question 1

A ………… gap means that for a parallel increase in all interest rates, the market value of net worth will tend to decline.

Answer 1

positive-duration

Question 2

….is the spread between the cash price and futures price of an underlying asset.

Answer 2

Basis

Question 3

When investors buy or sell a futures contract, they must deposit a(n)……. when they first enter into the contract.

Answer 3

initial margin

Question 4

Futures contracts are …. daily, which means that futures contracts are settled each day as their market value changes.

Answer 4

marked to market

Question 5

Jackson State Bank is worried because many of the loans it has made are home mortgages which can be paid off early by the homeowner. What type of risk would this be an example of?

Välj ett av alternativen:

a)
Basis risk

b)
Call risk

c)
Inflation risk

d)
Default risk

e)
Liquidity risk

Answer 5

b) call risk

Question 6

The amount of initial margin, the settlement price, and other rules regarding trading futures contracts are determined by the:

Välj ett av alternativen:

a)
SEC

b)
clearing house

c)
open interest

d)
floor brokers

e)
dealers

Answer 6

B) Clearing house

Question 7

A futures contract on a 30-day Eurodollar time deposit is currently selling at an IMM index of 95.10. The IMM index on a 30-day Eurodollar time deposit for immediate delivery is 95.75. What is the basis?

Välj ett av alternativen:

a)
165 basis points

b)
265 basis points

c)
65 basis points

d)
-65 basis points

Answer 7

c)
65 basis points

Question 8

Suppose a $100,000 T-Bond futures contract whose underlying’s duration is 9 years and has a current market price of $98,750. Market interest rates are 6 percent today but are expected to rise to 7.5 percent. What is the expected change in this futures contract’s market price as a result of this change in interest rates?

Välj ett av alternativen:

a)
-11000

b)
-12,577

c)
-9000

d)
12,577

e)
30000

Answer 8

b)
-12,577

Question 9

All of the following interest-rate futures contracts are traded on exchanges, except:

Välj ett av alternativen:

a)
Federal funds futures contract

b)
Treasury bond futures contract

c)
Corporate bond futures contract

d)
Eurodollar time deposit futures contract

e)
Eurodollar futures contract

Answer 9

c)
Corporate bond futures contract

Question 10

The interest-rate measure often quoted on short-term loans and money market securities such as U.S. Treasury bills is the

Välj ett av alternativen:

a)
net interest margin

b)
bank discount rate

c)
annual percentage rate

d)
Bond equivalent yield

e)
Yield to maturity

Answer 10

b)
bank discount rate

Question 11

The principal goal of interest rate hedging strategy is to hold fixed a bank’s:

Välj ett av alternativen:

a)
net income before taxes

b)
net interest margin

c)
interest sensitive liabilities

d)
value of loans and securities

e)
interest sensitive assets

Answer 11

b)
net interest margin

Question 12

Which of the following is a true statement?

Välj ett av alternativen:

a)
For a given duration and change in interest rates, the change in the price of the security will be larger for a lower starting level of interest rates

b)
All of the options are true statements

c)
The lower the coupon rate of a security, the higher the duration

d)
The duration of a security decrease when the level of market interest rates increase

e)
The longer the time to maturity of a security, the smaller will be the duration

Answer 12

a)
For a given duration and change in interest rates, the change in the price of the security will be larger for a lower starting level of interest rates

Question 13

hich of the following is an advantage of trading financial futures to hedge interest-rate risk?

Välj ett av alternativen:

a)
All of the options are correct

b)
Brokers’ commissions are relatively low

c)
There is no market risk in trading futures contracts

d)
Only a fraction of the value of the contract must be pledged as collateral and brokers’ commissions are relatively low

e)
Only a fraction of the value of the contract must be pledged as collateral

Answer 13

d)
Only a fraction of the value of the contract must be pledged as collateral and brokers’ commissions are relatively low

Question 14

A bank with a negative interest-sensitive GAP:

Välj ett av alternativen:

a)
will generate a lower interest margin if interest rates fall

b)
will generate a higher interest margin if interest rates rise

c)
has liabilities with a greater duration than its assets

d)
has a greater dollar volume of interest-sensitive liabilities than interest-sensitive assets

e)
has assets and liabilities with the same duration

Answer 14

d)
has a greater dollar volume of interest-sensitive liabilities than interest-sensitive assets

Question 15

A financial institution with a negative interest -sensitive gap can reduce the risk of loss due to changing interest rates by:

Välj ett av alternativen:

a)
All of the options are correct

b)
extending assets maturities

c)
reducing short-term interest-sensitive liabilities

d)
decreasing short-term interest-sensitive assets

Answer 15

c)
reducing short-term interest-sensitive liabilities

Question 16

The Arnold National Bank has a bond portfolio that consists of bonds with 5 years to maturity and a 9 percent coupon rate having a face value of $1,000. Coupon payments are made annually on this bond. The bond is discounted at 9% rate

What is duration of these bonds?

Välj ett av alternativen:

a)
4,24 years

b)
3,28 years

c)
3.77 years

d)
9 years

Answer 16

a)
4,24 years

Question 17

Maryellen Epplin notices that a particular T-Bill has a banker’s discount rate of 6 percent in the Wall Street Journal. She knows that this T-Bill has 30 days to maturity and has a face value of $10,000.

What price is this T-Bill future selling for in the market?

Välj ett av alternativen:

a)
10000

b)
None of the options is correct

c)
1900

d)
9950

e)
9090

Answer 17

d)
9950

Question 18

The realized return to a bank from a combined cash and futures market trading operation is composed of which of the following elements?

Välj ett eller flera alternativ:

a)
Returns earned in the cash market

b)
Profit or loss from futures trading and the difference between the opening and closing basis between cash and futures markets

c)
Difference between the opening and closing basis between cash and futures markets

d)
All of the options are correct

e)
Profit or loss from futures trading

Answer 18

d)
All of the options are correct