How can banks measure interest-rate risk?
What will be an ideal response?
Bank managers use gap analysis and duration analysis to measure how vulnerable their banks are to interest rate risk.
Gap analysis looks at the difference, or gap, between the dollar value of a bank's variable-rate assets and the dollar value of its variable-rate liabilities.
Duration analysis measures how sensitive a bank's capital is to changes in market interest rates. A bank's duration gap is the difference between the average duration of the bank's assets and the average duration of the bank's liabilities.
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Competition as a dynamic process implies that the individual firms in an industry
a. face a perfectly elastic demand curve. b. utilize a variety of techniques, such as product, style, and price, to win the dollar votes of consumers. c. produce a homogeneous product. d. cooperate, attempting to establish a price and output structure so each firm can survive and continue to serve the consumer.
If perfectly competitive firms are earning positive economic profits in the short run, then in the long run other firms will enter the market.
Answer the following statement true (T) or false (F)