1. If you are considering buying a bond and you expect interest rates to rise, all else equal, you would prefer a bond with
2. 1. high duration
   2. Low duration

2. Which of the following transactions would not directly influence the amount of required reserves a bank must hold?
   1. A local Girl Scout troop collects $250 in cash and deposits it in a bank savings account.
   2. You move $2000 from a matured CD account to your NOW account.
   3. You sell a car for $5,000 and deposit the buyers check into your checking account.

3. The underlying assets in a CMO are:
   1. Car loans.
   2. Credit card loans.
   3. Student loans.
   4. Mortgage loans.
   5. Commercial loans.

4. Your bank is liability sensitive, and you want to reduce the amount of that exposure. Which strategy involving the investment portfolio would help reduce the liability sensitivity?
   1. Lengthen investment maturities
   2. Shorten investment maturities

5. For a GAP analysis, which one of the following would not be rate sensitive at the six-month timeframe?
   1. Three-month T-bill
   2. Fed funds sold (daily repricing)
   3. Four-year fully amortized car loan with fixed monthly principal and interest payments
   4. 20-year commercial real estate loan priced at Prime (adjusts daily).