A Bank That Finances Long-Term Fixed-Rate Mortgages with Short-Term Deposits

question 11

Multiple Choice

A bank that finances long-term fixed-rate mortgages with short-term deposits is exposed to

• A)increases in net interest income and decreases in the market value of equity when interest rates fall.
• B)decreases in net interest income and decreases in the market value of equity when interest rates fall.
• C)decreases in net interest income and increases in the market value of equity when interest rates increase.
• D)increases in net interest income and increases in the market value of equity when interest rates increase.
• E)decreases in net interest income and decreases in the market value of equity when interest rates increase.

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Definitions:

Syntax

The set of rules, principles, and processes that govern the structure of sentences in a given language.

Morphology

The study of the forms and structures of things, in linguistics focusing on the formation and structure of words, and in biology the structure and form of organisms.

Phonemes

The tiniest sound element in a language that can differentiate one word from another.

Morphemes

The smallest units of language that carry meaning, including prefixes, suffixes, and root words.