FINANCE 306 FINAL Exam 2026|2027 Advanced Practice Questions and Answers with Complete A+ Solutions 100% Correct!!!

FINANCE 306 FINAL Exam 2026|2027 Advanced Practice Questions
and Answers with Complete A+ Solutions 100% Correct!!!

The FDIC is concerned about issuance of mortgage-backed bonds (MBBs) because: - Correct Answer -The
agency is concerned about investors prepayment risk




In a 3-class CMO, Class A has the ____ prepayment protection while with Class C has the____ prepayment
function - Correct Answer -least, most




Brooksly Born was the chair of the___ from 1996-1999 - Correct Answer -CFTC




1. If the interest rates are expected to decline, describe at least 2 different derivatives strategies that
would result in a payoff gain.
2. Also, what repricing gap (+/-) and duration gap (+/-) puts the bank at risk when interest rates are
expected to decline - Correct Answer -1. If interest rates are expected to go down, the FI could buy a call
option or write a put option. The price of the bond will increase as the interest rates fall. This will help the
FI generate cash flow.
2. If interest rates are expected to go down this means that the FI has a negative duration gap(duration of
assets less than liabilities) and a positive repricing gap( interest sensitive assets exceed interest
sensitive liabilities .




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