Theoretical Questions (10 marks * 3 = 30 marks) 1. Briefly explain the determinants of interest rate risk premium of a loan or security. Sunshine State Bank currently has an interest sensitive ratio of 1.45. In regards to interest sensitive gap management, explain the impacts of rising and declining interest rates, the potential risks the bank is exposed to and how these risks can be managed. 2. Explain the following using a numerical example for each: (a) Structured Note (b) Banker's Acceptance 3. Briefly explain the Asset Liquidity Management Strategy. What are the potential benefits and drawbacks of a bank this this strategy?