If Finance Companies Have Liabilities That Are More Rate Sensitive

question 7

Multiple Choice

If finance companies have liabilities that are more rate sensitive than their assets and want to reduce interest rate risk, they could

• A)shorten their average asset life.
• B)lengthen their average asset life.
• C)shorten the maturity of debt that they issue.
• D)make greater use of fixed-rate loans.

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Definitions:

Planning

The process of making plans for something, including setting goals and determining the means to achieve them.

Organizing

The act of arranging elements following one or multiple logics with the aim to reach a specific goal or manage a system of complexity.

Leading

The process of influencing others towards the achievement of goals; in a business context, it involves motivating employees and guiding the organization in a clear direction.

Employees

Individuals who are hired by a business or organization to perform specific tasks in exchange for compensation.