The principal goal of interest rate hedging strategy is to hold fixed a bank's:
A)net interest margin.
B)net income before taxes.
C)value of loans and securities.
D)interest sensitive assets.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

The goal of an interest rate hedging strategy is to mitigate the risk of interest rate fluctuations and maintain a stable net interest margin. This is achieved by balancing the bank's interest-sensitive assets and liabilities, such as loans and deposits, with various hedging instruments like interest rate swaps or options. By doing so, the bank is better able to project its future interest income and expenses, which helps in maintaining a consistent net interest margin. Therefore, the correct answer is A.

The Principal Goal of Interest Rate Hedging Strategy Is to Hold