Response to the following questions:
1. What is reinvestment risk? How is reinvestment risk part of interest rate risk? If an FI funds short-term assets with long-term liabilities, what will be the impact on earnings of a decrease in the rate of interest? An increase in the rate of interest?
2. The sales literature of a mutual fund claims that the fund has no risk exposure since it invests exclusively in default risk-free federal government securities. Is this claim true? Why or why not?