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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 bankā€™s assets and liabilities focuses on controlling the gap between rate sensitive assets and rate sensitive liabilities. Ā  The NII can be insulated from the volatility of interest rate by matching maturities of assets and liabilities closely.

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