not an assumption behind the pure expectation theory

within a given S What would you expect management to do if they expect interest rates time peried? expect (a) Increase the interest rate on loans (b) Strive for a zero gap for that time peried Id) Strive for a negative gap for that time period year bond with a coupon rate of 4% or the interest rate on leans and deposits to compensate for the (c) Strive for a positive gap for that time period have the same yield, which bond will have the longer duration- $1000 4 bond with a coupon rate of 6%? a $1000 4-year a) The bond with a coupon rate of 4%. (d) The bond with a coupon rate of 6%. 7 A bond has a duration (b) impossible to determine without knowing the yield. (c) Both will have the same duration of 6.2 years. What is the expected change in price if the yield increases from 3% to 3.01%? (a) (b) (c) (d) 0060296 0.0637% -0.0637% -0.0602% A bank has interest-rate sensitive assets with a value of $540 and a weighted duration of 6.6 8 years, and interest-rate sensitive liabilities with a value of $720 and a weighted duration of 6.4 years. What is the bank's duration gap? (a) 1.80 b) 2.40 (c) -1.93 (d) 1.45 9 A bank has interest-rate sensitive assets with a value of $400 and a weighted duration of 5.9 years, interest-rate sensitive liabilities with a value of $420 and a weighted duration of 5 years, and a duration gap of 0.65 years. What is the effect on the bank's net equity if the interest rate decreases from 9% to 8.99%? (a) -$0.0239 (b) $0.0239 (c) $0.0250 (d) $0.0250 10 What would you expect management to do if they expect interest rates to increase in the future? (a) Strive for a negative duration gap. (b) Strive for a positive duration gap. (c) Strive for a zero duration gap. (d) Reduce the interest rate on loans and deposits to compensate for the expected increase in interest rates