If a bank has assets and liabilities in dollars and euros, its exposure to interest rate risk can best be minimized if the
A)currency mix of assets is similar to that of liabilities.
B)overall rate sensitivity of assets and liabilities is similar.
C)rate sensitivity of assets and liabilities is matched for each currency.
D)currency mix of assets is similar to that of liabilities AND overall rate sensitivity of assets and liabilities is similar.

Question

Quizplus · Accepted Answer

Matching the rate sensitivity of assets and liabilities for each currency minimizes interest rate risk by ensuring that changes in interest rates affect assets and liabilities equally within each currency.

If a Bank Has Assets and Liabilities in Dollars and Euros