Bank of the Atlantic Has Liabilities of $4 Million with an Average

question 39

Multiple Choice

Bank of the Atlantic has liabilities of $4 million with an average maturity of two years paying interest rates of 4.0 percent annually.It has assets of $5 million with an average maturity of 5 years earning interest rates of 6.0 percent annually.To what risk is the bank exposed?

• A)Reinvestment risk.
• B)Refinancing risk.
• C)Interest rate risk.
• D)Reinvestment risk and interest rate risk.
• E)Refinancing risk and interest rate risk.

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Definitions:

Setups

The preparation and adjustment processes required to make equipment ready for production or to switch production from one item to another, often involving significant time and cost.

Washing Mitt

A glove-like tool designed for washing surfaces, often used in car detailing and household cleaning.

Polishing Cloth

A soft fabric used for cleaning and making surfaces shine, especially in the context of metal or furniture finishing.

Activity-based Costing

Activity-based costing allocates overhead and indirect costs to specific activities related to the production of goods or services, providing more accurate product costing.