Explanation:
Key rate exposures assume that rate changes affect adjacent rates but not distant rates. In a key rate framework:
The assumption that the 2-year rate will affect the 20-year rate is NOT part of the key rate framework. Key rate exposures assume that rate changes only affect nearby maturities, not distant ones.
Ultimate access to all questions.
Using key rates of 2-year, 5-year, 7-year, and 20-year exposures assumes all of the following except that the:
A
2-year rate will affect the 5-year rate
B
7-year rate will affect the 20-year rate
C
5-year rate will affect the 7-year rate
D
2-year rate will affect the 20-year rate
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