After conducting a rate-sensitive analysis,a bank finds itself with the following amounts of rate-sensitive assets and liabilities (RSAs and RSL) and fixed-rate assets and liabilities (FRAs and FRLs) ; the rate of return and cost rates on the accounts are also given:
If the bank wishes to set up a swap to totally hedge the interest rate risk,the bank should
A) pay a variable rate of interest and receive a fixed rate of interest.
B) pay a fixed rate of interest and receive a variable rate of interest.
C) pay a variable rate of interest and receive a variable rate of interest.
D) pay a fixed rate of interest and receive a fixed rate of interest.
E) None of the options are correct.
Correct Answer:
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