Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However, the U.S.Treasury bonds currently are worth $28,387,500. If the portfolio manager wants to shorten the bank's asset maturity, what type of risk is she concerned about?
A)Credit risk.
B)Foreign exchange rate risk.
C)The risk of rising interest rates.
D)The risk of falling interest rates.
E)Default risk.

Question

Quizplus · Accepted Answer

The portfolio manager is concerned about the risk of rising interest rates because if interest rates increase, the value of the U.S. Treasury bonds will decrease, leading to a larger loss for the bank. Shortening the bank's asset maturity would reduce this risk.

Conyers Bank Holds U