Response to the following questions:
1. How can interest rate risk adversely affect the economic or market value of an FI?
2. How does a policy of matching the maturities of assets and liabilities work ( a ) to minimize interest rate risk and ( b ) against the asset-transformation function for FIs?
3. Corporate bonds usually pay interest semiannually. If a company decided to change from semiannual to annual interest payments, how would this affect the bond's interest rate risk?
If possible, please give examples to better understand your response.