Complete the Following Sentence

question 583

Multiple Choice

Complete the following sentence. If a bank has an asset repricing in 6 months funded by a liability repriced in 3 months:

• A) the bank would benefit from higher interest rates
• B) the bank could hedge this interest rate risk with a 3x6 derivative
• C) the bank will make mark-to-market losses if rates decrease
• D) the bank could hedge this interest rate risk by selling a 6x9 derivative

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Definitions:

Print Money

Refers to the process by which a country's central bank creates money, often leading to inflation if done excessively.

Federal Government

The national government of a federation, which holds the authority to govern on matters that affect the entire country, such as defense, fiscal policy, and interstate commerce.

Treasury Bond

A long-term, interest-bearing security issued by the U.S. government considered a low-risk investment.

Price-Earnings Ratio

A valuation metric comparing a company’s current share price to its per-share earnings, indicating the market's expectations of growth.