8-37 Which of the following observations about the repricing model is correct?
A)Its information value is limited.
B)It accounts for the problem of rate-insensitive asset and liability runoffs and prepayments.
C)It accommodates cash flows from offbalance-sheet activities.
D)It points out an FI's profit exposure to interest rate changes.
E)It considers market value effects of interest rate changes.

Question

Quizplus · Accepted Answer

The repricing model points out an FI's profit exposure to interest rate changes. The other options are incorrect. The information value of the repricing model may be limited as it only considers the timing and amount of interest rate-sensitive assets and liabilities. It does not account for the problem of rate-insensitive asset and liability runoffs and prepayments, and it does not accommodate cash flows from off-balance-sheet activities. Additionally, the repricing model does not consider market value effects of interest rate changes.

8-37 Which of the Following Observations About the Repricing Model