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

If the portfolio manager wants to shorten the bank's asset maturity, she is likely concerned about the risk of rising interest rates. Shortening the asset maturity would mean that the bank's assets would come due sooner, allowing it to reinvest the proceeds at potentially higher interest rates. This strategy would help protect the bank from the risk of rising interest rates, which could cause the value of longer-term assets to decline.

If the Portfolio Manager Wants to Shorten the Bank's Asset