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3) Financial Institutions speculate on the yield curve when they invest in financial assets with durations different from those of their financial liabilities. Thrifts bear

3) Financial Institutions speculate on the yield curve when they invest in financial assets with durations different from those of their financial liabilities. Thrifts bear interest rate risk when their financial assets and liabilities are imperfectly matched on duration. Discuss the interest rate risk of Thrifts with reference to Yield Curve Speculation. (Marks 02)

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