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    Question

    The Net Interest Income (NII) can be insulated from the

    volatility of interest rate by ______ of assets and liabilities closely.
    A Matching maturity Correct Answer Incorrect Answer
    B Matching interest rate Correct Answer Incorrect Answer
    C Matching profit margin Correct Answer Incorrect Answer
    D Matching credit risk Correct Answer Incorrect Answer
    E Matching operational risk Correct Answer Incorrect Answer

    Solution

    The actual management of bank’s assets and liabilities focuses on controlling the gap between rate sensitive assets and rate sensitive liabilities.   The NII can be insulated from the volatility of interest rate by matching maturities of assets and liabilities closely.

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