The economic insolvency of many thrift institutions during the 1980s was due, at least in part,...

The economic insolvency of many thrift institutions during the 1980s was due, at least in part, to unexpected increases in interest rates.

True False

The repricing model is a simplistic approach to focusing on the exposure of net interest income to changes in market levels of interest rates for given maturity periods.

True

False

Expert Solution

Answer 1 ) True

Reason :- in 1980s due to unexpected increase in interest rate and decrease in asset quality there is massive loss to throughout the saving and loan industry .Most thrifts in financial straits suffered losses due to this unanticipated increase in interest rates .

Answer 2 ) True

Reason :- The repricing model is a simplistic approach to focusing on the exposure of net interest income to changes in market levels of interest rates for given maturity periods. A positive repricing gap implies that a decrease in interest rates will cause interest expense to decrease more than the decrease in interest income.

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