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4. Explain the two main types of interest rate risk faced by a bank and how each is measured. How are depository institutions' balance sheets
4. Explain the two main types of interest rate risk faced by a bank and how each is measured. How are depository institutions' balance sheets and income statements affected if rates increase and if they decrease (assume a positive funding GAP and a positive duration GAP)? 5. Demand deposits are "free" to a bank because they do not require interest. Give 3 reasons why this statement is not true
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