A Bank That Expects Interest Rates to Fall Will

question 33

Multiple Choice

A bank that expects interest rates to fall will

• A)want the duration of its assets to be greater than the duration of its liabilitiesa positive duration gap.
• B)want the duration of its assets to be less than the duration of its liabilitiesa positive duration gap.
• C)want the duration of its assets to be greater than the duration of its liabilitiesa negative duration gap.
• D)want the duration of its assets to be less than the duration of its liabilitiesa negative duration gap.

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Definitions:

Liquidity

Liquidity refers to the ease with which assets can be converted into cash without significantly affecting their market price, crucial for meeting short-term obligations.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company in using its assets to generate sales or revenue.

Profitability

A measurement of an entity's ability to generate income in relation to its revenue, assets, or equity.

Assets

Resources owned by a company that have economic value and can be used to meet its obligations or invest in its operations.