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.
E) None of the options are correct.
Correct Answer:
Verified
Q41: What are four major weaknesses of the
Q42: Weaknesses of the duration gap immunization model
Q43: A bank has book value of assets
Q44: What factors can cause a bank's book
Q45: The effect of an interest rate change
Q47: A thrift has an annual CGAP of
Q48: A bank has DA = 2.5 years,DL=
Q49: Explain how an FI's capital protects against
Q50: Convexity in bond prices is caused by
Q51: A thrift has an annual CGAP of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents