Which of the Following Best Describes Maturity Mismatch and Its

question 5

Multiple Choice

Which of the following best describes maturity mismatch and its role in bank operations?

• A)It refers to banks selling old loans so they can take on new loans,which earns a capital gain.
• B)It refers to banks lending for the long term and borrowing for the short term,which earns positive net interest income.
• C)It refers to the outdated accounting rules that most banks must operate under.
• D)It refers to the inequality between accounting allowances for bad loans and the actual rate of losses on those loans.

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Definitions:

Conceptual Framework

A set of fundamental principles and objectives that guides the development of accounting standards and practices.

General Purpose

Aimed to serve a wide range of uses or objectives rather than being specialized for a specific function or task.

Financial Reporting

The method of generating reports that reveal the financial condition of an organization to its management, investors, and governmental bodies.

Legal System

A comprehensive system of rules and principles organized to regulate societal behaviors, enforced through institutions.