Consider the Unbiased Expectations Theory of the term structure as presented in Chapter $8.$

True or False: This theory can produce downward sloping yield curves.

a$)$ True

b$)$ False

Consider the Liquidity Premium Theory of the term structure as presented in Chapter $8.$ True

or False: This theory can produce downward sloping yield curves.

a$)$ True

b$)$ False

True or False: Immunizing the balance sheet against changes in capital ratio is the preferred

method of minimizing risk to shareholders.

a$)$ True

b$)$ False

Consider a bank whose equity value currently decreases when interest rates rise. True or

False: To better immunize itself, the bank should issue shorter term loans and obtain longer

term deposits.

a$)$ True

b$)$ False

Define LTV is the following ratio: Outstanding Loan Amount $/$ Current Home Value. True or

False: In the case of a default, a bank is better protected for high LTV loans than low LTV loans.

a$)$ True

b$)$ False