The analysis that involves measuring an organisation's sensitivity of profits to changes in interest rates,by multiplying the difference in rate-sensitive assets and liabilities by the changes in interest rate,is called:
A) basic duration analysis.
B) repricing gap analysis.
C) interest exposure analysis.
D) gap-exposure analysis.

Question

Quizplus · Accepted Answer

The described analysis is known as repricing gap analysis, which involves measuring an organization's sensitivity to changes in interest rates by comparing its rate-sensitive assets and liabilities and multiplying the difference by the changes in interest rates. Option A, basic duration analysis, involves calculating the average time of cash flows from fixed-income securities, and option C, interest exposure analysis, is a more generic term for assessing an organization's overall exposure to interest rate changes. Option D, gap-exposure analysis, is not a commonly used term in finance.

The Analysis That Involves Measuring an Organisation's Sensitivity of Profits