1. The \"repricing gap\" model focuses on changes in the ____________ of a bank

Question

1. The "repricing gap" model focuses on changes in the ____________ of a bank

Select one:

a. market value of assets

b. market value of liabilities

c. interest income and interest expense

d. non-interest expenses

e. a and b

2. A "rate sensitive liability" in a one-year maturity bucket represents the amount of liabilities that __________________ within one year.

Select one:

a. may mature

b. may have adjustable interest rates

c. will not be rolled

d. a and b

e. all of the above

3. CSUN National Bank is experiencing an unexpected and large number of requests for funds under existing loan commitments. This is the essence of:

Select one:

a. asset side liquidity risk

b. credit risk

c. net deposit drain

d.liability side liquidity risk

e. c and d

4. If a bank has to raise liquidity by selling off loans on short notice, the prices on such loan sales would be termed __________ prices.

Select one:

a. fire-sale

b. maximum liquidity

c. deposit drain

d. face value

e. book value

Explanation / Answer

Answer:

1) e. a & b

The repricing gap focuses on changes in the market value/dollar rate changes in the assets and liabilities. It is the difference between the dollar rate changes in the assets and the dollar rate changes in the liabilities.

2) d.

A rate sensitive liability in a one year maturity bucket represents the amount of liabilities that may mature and may have adjustable interest rates within one year

3) a.

When there is an asset side liquidity risk for a bank, there shall be large number of requests for funds under existing loan commitments.

4) a

If a bank has to raise liquidity by selling off loans on short notice, the prices on such loan sales would be termed fire-sale prices. Fire-sale is a phenomenon in which the goods are sold at a massive discount. In this case loans are sold off for liquidity at massive low price and at short notice.

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