8-39 The repricing gap does not accurately measure FI interest rate risk exposure because
A)FIs cannot accurately predict the magnitude change in future interest rates.
B)FIs cannot accurately predict the direction of change in future interest rates.
C)accounting systems are not accurate enough to allow the calculation of precise gap measures.
D)it does not recognize timing differences in cash flows within the same maturity grouping.
E)equity is omitted.

Question

Quizplus · Accepted Answer

The repricing gap only considers the timing of cash flows within each maturity grouping, ignoring the possibility of timing differences within the grouping. This can result in an inaccurate measurement of interest rate risk exposure. The other options (A, B, C, and E) are all potential challenges to accurately measuring interest rate risk, but they do not directly address the limitations of the repricing gap as a measurement tool.

8-39 the Repricing Gap Does Not Accurately Measure FI Interest