If Second Bank Has More Rate-Sensitive Assets Than Rate Sensitive

question 22

Multiple Choice

If Second Bank has more rate-sensitive assets than rate sensitive liabilities, it can reduce interest rate risk with a swap which requires Second Bank to ________.

• A) pay a fixed rate while receiving a floating rate
• B) receive a fixed rate while paying a floating rate
• C) both receive and pay a fixed rate
• D) both receive and pay a floating rate

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Definitions:

Covenant Not to Compete

A legal agreement in which one party agrees not to enter into or start a similar profession or trade in competition against another party.

Unreasonable

Actions or decisions that lack rational basis, often seen as unfair or unjustified under the given circumstances.

Essential Terms

The critical and necessary conditions or clauses in a contract that define the parties' key obligations and rights.

Illegal Contract

is an agreement between parties that is not enforceable by law due to its involvement in illegal activities or its terms violating legal statutes.