Assume that the price of security is $1000 and the duration of the security is 6.763 years. The current yield to the maturity is 10% and Coupons are paid semi-annually, what should be the dollar duration?

Select one:

a.

6763

b.

6441

c.

11000

d.

9000

2.

Choose the correct answer:

Select one:

a.

Regulatory taxes such as reserve requirements create an incentive for banks to remove loans from the balance sheet by selling them without recourse to outside parties.

b.

Regulatory taxes such as reserve requirements create an incentive for banks to offer low rate mortgages.

c.

Regulatory taxes such as reserve requirements create an incentive for banks limit their lending to large corporates only.

d.

None of the listed options are correct.

3.

In order to achieve a zero duration gap, an FI can:

Select one:

a.

change the duration of its assets only

b.

change the duration of its liabilities only

c.

change the duration of both, assets and liabilities

d.

All of the listed options are correct.

4.

The major difference between firm-specific credit risk and systematic credit risk is that:

Select one:

a.

FIs can diversify systematic credit risk, while firm-specific credit risk cannot be diversified.

b.

FIs can diversify firm-specific credit risk, while systematic credit risk cannot be diversified.

c.

None of the listed options are correct, as FIs can diversify both types of credit risk.

d.

None of the listed options are correct, as FIs cannot diversify either type of credit ris