If Second Bank Has More Rate-Sensitive Assets Than Rate Sensitive

question 22

Multiple Choice

If Second Bank has more rate-sensitive assets than rate sensitive liabilities, it can reduce interest rate risk with a swap which requires Second Bank to ________.

• A) pay a fixed rate while receiving a floating rate
• B) receive a fixed rate while paying a floating rate
• C) both receive and pay a fixed rate
• D) both receive and pay a floating rate

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Definitions:

Population Mean

The average value of a set of characteristics (e.g., measurements, scores) for an entire population, calculated as the sum of all values divided by the number of values.

Confidence Interval

A statistical estimate of the range within which an unknown population parameter lies, calculated to express the certainty of its covering the true value.

Confidence Interval

A series of values, based on sample statistics, presumed to include the unknown value of a population parameter.

Population Parameter

A characteristic or measure that describes an aspect of an entire population, such as a population mean or variance.