Reference no: EM13515732

Multiple Choice

1.Immunization strategies deal mostly with _____________.

a.credit risk

b.market risk

c.convenience risk

d.interest rate risk

2.In a bullet immunization application, the manager seeks to get __________ and _____________to cancel.

a.interest rate risk, reinvestment rate risk.

b.interest rate risk, default risk.

c.convenience risk, price risk.

d.reinvestment rate risk, default risk.

3.A bank's funds gap equals

a.the extent to which asset duration exceeds liability duration.

b.total assets minus total liabilities.

c.total assets minus current liabilities.

d.rate sensitive assets minus rate sensitive liabilities.

4.Banks usually make duration adjustments by

a.altering the left side of the balance sheet.

b.altering the right side of the balance sheet.

c.altering both sides of the balance sheet.

d. altering only the equity account.

5.  Disadvantages of immunization include all of the following except

a.the opportunity cost of being wrong.

b.it only works for long term investment horizons.

c.transactions costs.

d. it reduces the portfolio yield.

6.The two main types of duration matching are

a.horizon matching and rate matching.

b.bullet immunization and bank immunization.

c.duration immunization and bond immunization.

d. gap matching and direct immunization.

7.Basis point value may be a function of all of the following except

a.duration.

b.portfolio size.

c.conversion factor.

d.beta.

8.A characteristic of most portfolio immunization strategies is

a.reduced portfolio yield.

b.increased portfolio interest rate risk.

c.increased portfolio reinvestment rate risk.

d.lower transaction costs.

9.A strategy to take advantage of anticipated changes in world uncertainty is the _______ spread.

a.TED 

b.NOB 

c.LED 

d.MOB 

10.The NOB spread is used by individuals anticipating

a.a decline in interest rates.

b.a rise in interest rates.

c.a parallel shift in the yield curve.

d.a change in the slope of the yield curve.