Assume That a Bank Obtains Most of Its Funds from Large

question 2

Multiple Choice

Assume that a bank obtains most of its funds from large CDs with a one-year maturity. Its assets are in the form of loans with rates that adjust every six months. The bank would be ____ affectedif interest rates increase. To partially hedge its position, it could ____ futures contracts.

• A) adversely; purchase
• B) favorably; sell
• C) favorably; purchase
• D) adversely; sell

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Definitions:

Profits Maximization

The process or strategy aimed at achieving the highest possible profit by a firm within a given period.

Imperfect Competition

All market structures except pure competition; includes monopoly, monopolistic competition, and oligopoly.

Labor Demand Elasticity

The sensitivity of employers' demand for labor to changes in the price or cost of labor, reflecting how much the quantity of labor demanded responds to changes in wages.

Total Costs

The cumulative costs associated with the complete process of producing and selling a product or service.