The Performance of a Bank That Continually Concentrates on Short-Term

question 37

Multiple Choice

The performance of a bank that continually concentrates on short-term deposits in euros and adjustable-rate dollar loans with equal rate sensitivity is

• A)unaffected if euro interest rates increase and U.S. rates decrease.
• B)unaffected if U.S. interest rates increase and euro interest rates decrease.
• C)adversely affected if euro interest rates increase and U.S. rates decrease.
• D)adversely affected if U.S. interest rates increase and euro rates decrease.
• E)unaffected if euro interest rates increase and U.S. rates decrease AND unaffected if U.S. interest rates increase and euro interest rates decrease.

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Definitions:

Fees Earned

Revenue generated from providing services, as opposed to selling goods.

Capital

Financial assets or the financial value of assets, such as funds held in deposit accounts and/or funds obtained from special financing sources.

Debits

Accounting entries that increase assets or expense accounts, or decrease liability, equity, or revenue accounts.

Credits

Accounting entries that increase liabilities or equity accounts, or decrease asset accounts.