The repricing gap approach calculates the gaps in each maturity bucket by subtracting the A.current liabilities from tangible assets.B.rate-sensitive liabilities from the rate-sensitive assets.C.rate-sensitive assets from the total assets.D.long term liabilities from the fixed assets.E.current assets from the current liabilities.

Which of the following statements is FALSE?A.The maturity bucket is the time window over which the dollar amounts of assets and liabilities are measured.B.If an FI wants to increase its repricing gap, it can replace its equity with demand deposits.C.If an FI wants to increase its repricing gap, it can replace fixed-rate loans with rate-sensitive loans.D.The repricing gap is a measure of the difference between the dollar value of assets that will reprice and the dollar value of liabilities that will reprice within a specific time periodE.According to the CGAP effect, when CGAP is positive the change in net interest income is positively related to the change in interest rates.

2. Team/CRO: report B05 gives you an assessment of your bank repricing gap. Set repricing gap targets (short and long-term horizon) given the current yield curve and your forecast of the yield curve. Additionally, take appropriate decision to manage your asset and liability to reach this target.

In terms of liquidity risk measurement, the financing gap is defined as A.total assets minus total liabilities.B.average loans minus average deposits.C.total deposits minus core deposits.D.rate sensitive assets minus rate sensitive liabilities.E.financing requirement plus liquid assets.

Assume you are the manager of an FI, how would you structure your balance sheet using the repricing gap model if you expected interest rates to fall?A.I would create either a positive gap or a negative gap.B.I would create both a positive gap and a negative gap.C.I would create a positive gap.D.I would create a negative gap.E.I would create a neutral gap.

Which of the following statements is TRUE?A.A positive repricing gap implies that a decrease in interest rates will cause interest expense to decrease more than the decrease in interest income. B.When the Reserve Bank finds it necessary to slow economic activity, it allows interest rates to fall. C.The repricing model estimates the difference between interest earned and interest paid during a given period of time. D.The repricing model is a simplistic approach to focusing on the exposure of net interest income to changes in market levels of interest rates for given maturity periods. E.If the average maturity of assets is 4 years and the average maturity of liabilities is 4 years, then the FI has no interest rate risk exposure.