If a Bank Has a Gap of -$10 Million,it Can

question 110

Multiple Choice

If a bank has a gap of -$10 million,it can reduce its interest-rate risk by

• A) paying a fixed rate on $10 million and receiving a floating rate on $10 million.
• B) paying a floating rate on $10 million and receiving a fixed rate on $10 million.
• C) selling $20 million fixed-rate assets.
• D) buying $20 million fixed-rate assets.

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Definitions:

Equity Capital

The funds raised by a company in exchange for shares of ownership, providing investors with a stake in the company.

Institutional Sources

Organizations or establishments that provide substantial information, data, or funding, often in a formalized or official capacity.

Run Out Of Money

A situation where a business or individual exhausts their financial resources and cannot meet financial obligations.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to run its day-to-day operations.