Start learning →

CA Final Interest Rate Risk — practice questions

Explore 78 free Interest Rate Risk questions in CA Final Strategicfinancialmanagement. Open each question or exercise to read its content, reference answers and available explanation.

Practise Interest Rate Risk with Quill →

Interest Rate Risk questions and exercises with answers

Showing questions 1–30 of 78.

A bond's rate sensitivity depends on its coupon and which other factor?Read the answer and worked solution →Yield curve simulation for rate risk usually uses which framework?Read the answer and worked solution →Shifting the yield curve in a set way to test portfolio value is called what?Read the answer and worked solution →A mismatch of rate-reset timing between assets and liabilities is measured by?Read the answer and worked solution →Which set is used to gauge a portfolio's rate sensitivity?Read the answer and worked solution →In the CAMELS rating, what does the final letter S stand for?Read the answer and worked solution →For most banks, which risk forms the largest part of CAMELS sensitivity?Read the answer and worked solution →A CAMELS rating of 4 or 5 for a bank indicates what?Read the answer and worked solution →Which insurers are particularly exposed to rate risk from long-term liabilities?Read the answer and worked solution →Why are property and casualty insurers less exposed to rate risk?Read the answer and worked solution →Cashflow matching and immunization are examples of which insurer approach?Read the answer and worked solution →Prolonged low interest rates hurt life insurers mainly by doing what?Read the answer and worked solution →What is the most common type of interest rate swap?Read the answer and worked solution →Each series of payments in a swap is called a what?Read the answer and worked solution →How common are fixed leg versus fixed leg interest rate swaps?Read the answer and worked solution →Float versus float swaps on different indexes are generally called what?Read the answer and worked solution →A swap whose floating leg is an overnight index is generally called?Read the answer and worked solution →A firm with floating-rate debt wants certainty. What can a swap do?Read the answer and worked solution →Which is the main category of risk in swaps besides credit risk?Read the answer and worked solution →The first-order link of swap value to interest rates is called what?Read the answer and worked solution →In swaps, gamma risk reflects what?Read the answer and worked solution →Basis risk in swaps arises when which of these deviate from each other?Read the answer and worked solution →Why does an uncollateralised swap carry funding risk?Read the answer and worked solution →The party with a positive swap value worries about what?Read the answer and worked solution →Banks adjust swap values for counterparty credit risk using which charge?Read the answer and worked solution →How do swap traders typically hedge net interest rate risk?Read the answer and worked solution →ICE Swap Rate replaced which earlier benchmark in 2015?Read the answer and worked solution →A swap is an asset to one party. What is it to the other?Read the answer and worked solution →Viewing a swap as a series of FRAs is considered what?Read the answer and worked solution →An FRA is best described as which contract?Read the answer and worked solution →

Worked practice questions

A bond's rate sensitivity depends on its coupon and which other factor?

  1. Credit rating of issuer
  2. Face value currency
  3. Exchange of listing
  4. Time to maturity
Show answer and solution

Correct answer: D. Time to maturity

Price sensitivity to market rates is driven by time left to maturity together with the coupon rate.

Open this question →

Yield curve simulation for rate risk usually uses which framework?

  1. Capital asset pricing model
  2. Modigliani-Miller theorem
  3. Black-Scholes option model
  4. Heath-Jarrow-Morton model
Show answer and solution

Correct answer: D. Heath-Jarrow-Morton model

The HJM framework keeps simulated curve moves consistent with current market curves and free of riskless arbitrage.

Open this question →

Shifting the yield curve in a set way to test portfolio value is called what?

  1. Stress testing
  2. Back testing
  3. Mark to model
  4. Hedge accounting
Show answer and solution

Correct answer: A. Stress testing

Applying a specific yield curve shift to the market value of assets and liabilities is a stress test.

Open this question →

How to practise

  1. Choose a Interest Rate Risk question and try to work out your answer.
  2. Open the question to check the correct answer and read its worked solution.
  3. Continue in the app for bite-sized lessons, explanations and review with Quill. You can start without creating an account.

More Strategicfinancialmanagement topics

Mergers Acquisitions and Corporate RestructuringBusiness ValuationCapital BudgetingForeign Exchange Exposure and Risk ManagementModern Portfolio TheoryPortfolio ManagementValuation (Finance)Futures Contract