If a Financial Institution Has Equated the Dollar Effects of Interest

question 4

Multiple Choice

If a financial institution has equated the dollar effects of interest rate risk on its assets with the dollar effects on its liabilities,it has engaged in:

• A) a long hedge.
• B) a short hedge.
• C) a protected swap.
• D) immunizing interest rate risk.
• E) None of these.

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Definitions:

Acquiring Knowledge

The process of learning or gaining information, skills, or understanding through experience, education, or instruction.

Mental Processes

Internal operations of the mind, including thinking, perceiving, remembering, and decision-making, that underlie behaviors.

Decision Making

The cognitive process of selecting a course of action from among multiple alternatives, typically resulting in a final choice.

Conditions Of Uncertainty

Situations in which individuals do not have sufficient information about the outcomes of different actions, making decision-making difficult.