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A Bank Has a Positive Duration Gap

Question 29

Multiple Choice

A bank has a positive duration gap. Which one of the following statements is most correct?


A) If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase long-term loans and decrease short-term loans.
B) If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase long-term loans and decrease short-term loans.
C) If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase short-term loans and decrease long-term loans.
D) If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase long-term bonds issued by the bank and decrease short-term bonds.

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