Which of the following statements is true?
A)The runoff component is rate-sensitive.
B)The runoff component is rate-insensitive.
C)The runoff component refers to interest payments on long-term liabilities that need to be refinanced at market rates.
D)The run-off component refers to interest payments on short-term liabilities that need to be refinanced at market rates.

Question

Quizplus · Accepted Answer

The runoff component is rate-sensitive because it refers to the portion of an investment portfolio or a financial institution's assets that are expected to be liquidated or mature over a certain period. The value and yield of these assets can be sensitive to changes in interest rates, affecting the cash flow and profitability from these assets as they run off or mature.

Which of the Following Statements Is True