An FI with a Positive Duration Gap (Longer Asset Maturities

question 110

True/False

An FI with a positive duration gap (longer asset maturities than liability maturities) will benefit by purchasing a call option position to hedge against interest rate increases

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Definitions:

Hyperinflations

An extremely high and typically accelerating inflation rate, often exceeding 50% per month, leading to a rapid erosion of the real value of the local currency and causing the population to minimize their holdings of the local money.

Money Growth

An increase in the amount of money in circulation or in the overall money supply within an economy.

Real Interest Rate

The interest rate that has been adjusted for inflation, reflecting the true cost of borrowing or real yield on investment.

Inflation Rate

How quickly the average cost of goods and services goes up, resulting in a drop in the ability to purchase.