A short-funded FI is exposed to increasing interest rates.

Name: A short-funded FI is exposed to increasing interest rates.
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Question

Quizplus · Accepted Answer

A short-funded FI has more short-term liabilities than long-term assets. As interest rates increase, the cost of borrowing for the FI also increases, putting pressure on their liquidity and profitability. Therefore, a short-funded FI is more vulnerable to the effects of increasing interest rates.

A Short-Funded FI Is Exposed to Increasing Interest Rates