To measure ____ risk, some savings institutions measure the duration of their respective assets and liabilities.
A) credit
B) interest rate
C) liquidity
D) none of the above

Question

Quizplus · Accepted Answer

Measuring the duration of assets and liabilities helps to determine the interest rate risk. Duration is a measure of the sensitivity of the value of a financial asset or liability to changes in interest rates. Therefore, option B, which is interest rate risk, is the best choice. Options A (credit risk) and C (liquidity risk) are not measured through duration.

To Measure ____ Risk, Some Savings Institutions Measure the Duration