Question
Which of the following is correct regarding Reinvestment Risk? Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â
i.       When Interest Rate at which the future cash flows can be reinvested are uncertain it is called Reinvestment Risk                            Â
ii.       Any mismatch in cash flows will expose a Bank                           Â
iii.       Since the market interest rates move in different directions, it will have variation in net interest income
Solution
Reinvestment risk is the uncertainty with regard to interest rate at which the future cash flows could be reinvested. Any mismatches in cash flows would expose the banks to variations in NII as the market interest rates move in different directions.
More Financial Management Questions
- What is a primary goal of workplace inspections in compliance with regulations?
- In Process A of a manufacturing unit, 1,000 units were introduced during the period. By the end of the month, 800 units were completed and transferred to t...
- Which of the following is/are the basic component(s) of financial risk?
- What category did India achieve in the FATF Mutual Evaluation?
- Improving quality through small, incremental improvements is a characteristic of what type of quality management system?
- What is the focus of applied ethics?
- Which tool leverages algorithms to analyze large datasets for demand prediction?
- What was India's external debt at end March 2024?
- What is the maximum percentage of investible funds that Category III AIFs can invest in a single portfolio entity?
- Which of the following correctly defines the term ‘monopsony’?
