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.

Which of the following statements is TRUE?A.Bank runs occur because customers know that banks will be forced to liquidate assets at fire-sale prices.B.Asset side liquidity risk arises from transactions that result in a transfer of cash to some other asset, such as the exercise of a loan.C.An expected net deposit drain on any given day means that deposit withdrawals are less than deposit inflows. D.Mutual funds tend to have more exposure to liquidity risk than banks. E.In terms of liquidity risk measurement, the financing gap is defined as rate sensitive assets minus rate sensitive liabilities.

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 is false regarding duration gap analysis?Question 1Answera.Duration gap accounts for bank leverage.b.Duration gap analysis indicates the potential change in a bank’s market value of equity.c.Duration gap accounts for the present value of cash flows associated with all liabilities.d.Duration gap analysis does not classify assets as rate-sensitive.e.Duration gap analysis indicates the potential change in a bank’s net interest income.

When an economy's output is than its potential output, the gap is known as a recessionary gap.

An FI has financial assets of $800 and equity of $50. If the duration of assets is 1.21 years and the duration of all liabilities is 0.25 years, what is the leverage-adjusted duration gap? A.0.8844 years.B.Cannot be determined.C.0.9000 years.D.0.9756 years.E.0.9600 years.