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A Bank with Short-Term Floating-Rate Assets Funded by Long-Term Fixed-Rate

Question 36

Multiple Choice

A bank with short-term floating-rate assets funded by long-term fixed-rate liabilities could hedge this risk by
I. buying a T-bond futures contract.
II. buying options on a T-bond futures contract.
III. entering into a swap agreement to pay a fixed rate and receive a variable rate.
IV. entering into a swap agreement to pay a variable rate and receive a fixed rate.


A) I and III only
B) I,II,and IV only
C) II and IV only
D) III only
E) IV only

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