If the average maturity of assets is 5 years and the average maturity of liabilities is 7 years, then the FI has no interest rate risk exposure.

Question

Quizplus · Accepted Answer

The FI has interest rate risk exposure because the average maturity of liabilities is longer than the average maturity of assets, meaning that if interest rates rise, the FI may have to pay more to fund its longer-term obligations while earning less on its shorter-term assets.

If the Average Maturity of Assets Is 5 Years and the Average