If a Bank Sells Interest Rate Futures, It ____ of Rising

question 61

Multiple Choice

If a bank sells interest rate futures, it ____ of rising interest rates and ____ of declining interest rates on its interest expenses.

• A) reduces the potential adverse effect; reduces the potential favorable effect
• B) increases the potential adverse effect; increases the potential favorable effect
• C) decreases the potential adverse effect; increases the potential favorable effect
• D) increases the potential adverse effect; decreases the potential favorable effect

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Definitions:

Pure Solvent

A liquid substance that is able to dissolve other substances (solute), without any impurities or admixtures.

Solution

A homogeneous mixture composed of two or more substances in which the solute is completely dissolved in the solvent.

Molality

A measure of the concentration of a solute in a solution in terms of amount of substance per mass of solvent, specifically moles of solute per kilogram of solvent.

Molarity

A measure of the concentration of a solute in a solution, expressed as the number of moles of solute per liter of solution.