FIN 306 Final Exam Review | Questions
and Well Detailed Answers | 2026 Update
| 100% Correct - Wilmington University.
True or False?
A rate sensitive asset is an asset whose interest rates will be repriced or changed over
some future period. -CORRECTANSWER True
True or False
If a bank has a negative repricing gap, the bank is exposed to refinancing risk, or the
risk that interest rates will increase and the cost of rolling over or reborrowing funds will
be higher than the interest revenue being earned on assets. -CORRECTANSWER True
A bank has rate sensitive assets of $100 and rate sensitive liabilities of $70. If interest
rates increased by 1%, what would be the expected annual change in net interest
income? -CORRECTANSWER $0.30
100-70 = 30
1% x 30 = .30
, A bank is facing a forecast of rising interest rates. What is the ideal repricing and
duration gap? -CORRECTANSWER Positive repricing gap and negative duration gap
A negative repricing gap is preferred when interest rates are expected to rise (interest
income will go up by more than interest expense goes up), and the negative duration
gap implies a positive relationship between changes in interst rates and changes in the
market value of the financial institution.
True or False
The higher the duration, the less sensitive the bond price is to changes in interest rates.
-CORRECTANSWER False
A bank has three assets. It has $75 million invested in consumer loans with a 3-year
duration, $39 million invested in T-Bonds with a 16-year duration, and $39 million in 6-
month maturity T-Bills with a 0.5-year duration. What is the duration of the bank's asset
portfolio in years? -CORRECTANSWER (75/153)*3 + (39/153)*16 + (39/153)*0.5 =
5.6765 years
A bond has three years left until it matures, the yield to maturity on the bond is 5% and
the annual coupon rate is 6%. If the face value (par value) of the bond is $1000,
calculate the bond's duration in years. -CORRECTANSWER Bond price equals 1027.23
Duration numerator is 60/1.05 + (2*60)/1.05^2 + (3*1060)/1.05^3 = 2,912.99
and Well Detailed Answers | 2026 Update
| 100% Correct - Wilmington University.
True or False?
A rate sensitive asset is an asset whose interest rates will be repriced or changed over
some future period. -CORRECTANSWER True
True or False
If a bank has a negative repricing gap, the bank is exposed to refinancing risk, or the
risk that interest rates will increase and the cost of rolling over or reborrowing funds will
be higher than the interest revenue being earned on assets. -CORRECTANSWER True
A bank has rate sensitive assets of $100 and rate sensitive liabilities of $70. If interest
rates increased by 1%, what would be the expected annual change in net interest
income? -CORRECTANSWER $0.30
100-70 = 30
1% x 30 = .30
, A bank is facing a forecast of rising interest rates. What is the ideal repricing and
duration gap? -CORRECTANSWER Positive repricing gap and negative duration gap
A negative repricing gap is preferred when interest rates are expected to rise (interest
income will go up by more than interest expense goes up), and the negative duration
gap implies a positive relationship between changes in interst rates and changes in the
market value of the financial institution.
True or False
The higher the duration, the less sensitive the bond price is to changes in interest rates.
-CORRECTANSWER False
A bank has three assets. It has $75 million invested in consumer loans with a 3-year
duration, $39 million invested in T-Bonds with a 16-year duration, and $39 million in 6-
month maturity T-Bills with a 0.5-year duration. What is the duration of the bank's asset
portfolio in years? -CORRECTANSWER (75/153)*3 + (39/153)*16 + (39/153)*0.5 =
5.6765 years
A bond has three years left until it matures, the yield to maturity on the bond is 5% and
the annual coupon rate is 6%. If the face value (par value) of the bond is $1000,
calculate the bond's duration in years. -CORRECTANSWER Bond price equals 1027.23
Duration numerator is 60/1.05 + (2*60)/1.05^2 + (3*1060)/1.05^3 = 2,912.99
