Which one of the following is not an example of repriceable interest-sensitive asset?

1. Cash.
2. Variable rate loans.
3. Short-term securities.
4. Federal funds sold.

   An asset-sensitive financial institution will typically hedge its position to avoid lower net interest income by:

5. Using an interest rate cap.
6. Executing a long hedge.
7. Using an interest rate collar.
8. Executing a put option.

   Assume that the US Central Bank increases market interest rates. Your banks net interest margin will likely decrease as a result if your bank has:

9. A negative Interest-sensitive ratio.
10. Relative interest-sensitive gap of zero.
11. A balance sheet that is liability-sensitive.
12. A balance sheet that is asset-sensitive

    The most typical interest-rate hedging problem financial institutions face is:

13. Avoiding a fall in borrowing costs.
14. Avoiding interest-sensitive assets equaling interest-sensitive liabilities.
15. Avoiding decrease in net interest income resulting from movements in market interest rates.
16. Avoiding a fall in interest returns expected from loans and security holdings.

    Which of the following is true about money market securities

17. They provide lower return.
18. If interest rates rise, security prices will fall.
19. If interest rates fall, security prices will rise.
20. All of the above.

    When interest rates rise:

21. Longest-term bonds suffer the greatest risk.
22. There is no effect on bond prices.
23. Shortest-term bonds suffer the greatest gains.
24. Longest-term bonds generate the greatest gains.

    Which of the following is not a function of a banks security portfolio:

25. Increase tax exposure.
26. Decrease credit risk exposure.
27. Provides geographic diversification.
28. Provides stable income.

    Which of the following is not a money market security?

29. Treasury bills.
30. Municipal notes and bonds.
31. Certificates of deposits.
32. Eurocurrency deposits.

    Liquidity risk for a financial institution means:

33. The risk that the security issuer may default on the principal or the interest owed.
34. Securities can be purchased from outside the market area served.
35. Can a security be converted to cash quickly and easily without significant loss in value?
36. Both (a) and (c).