In an Interest Rate Swap, a Bank Whose Liabilities Are

question 57

Multiple Choice

In an interest rate swap, a bank whose liabilities are ____ rate sensitive than its assets can swap payments with a ____ interest rate in exchange for payments with a ____ interest rate.

• A)more; fixed; variable
• B)more; variable; fixed
• C)less; fixed; variable
• D)less; fixed; fixed
• E)None of these are correct.

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Definitions:

Rights Offering

A method by which companies raise capital, allowing current shareholders to purchase additional shares at a discounted price before the general public.

Market Price

The current listed price for buying or selling a service or asset.

Underwriters' Spread

The difference between the price at which underwriters purchase securities from issuers and the price at which these securities are then sold to the public.

Stock Issue

The process by which a company distributes its shares to investors, either through initial public offerings (IPOs) or secondary offerings, to raise capital.