A Bank Has a Negative Duration Gap

question 7

Multiple Choice

A bank has a negative duration gap. Which one of the following statements is most correct?

• A)If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase the amount of short-term loans on the balance sheet.
• B)If all interest rates are projected to increase,to limit a net value decline before rates rise,the bank should increase the amount of short-term bonds issued by the bank.
• C)If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase the amount of long-term loans on the balance sheet.
• D)If all interest rates are projected to decrease,to limit a net value decline before rates fall,the bank should increase the amount of long-term bonds issued by the bank.

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Definitions:

Geographical Structure

An organization structure that groups together people and jobs performed in the same location.

Customer Structure

refers to the way a business organizes its customer base, often based on factors like demographics, buying behavior, or customer needs.

Matrix Structure

An organizational layout that assigns specialists from different departments to work on one or more projects under the coordination of a project manager.

Permanent Teams

Groups of individuals who work together on an ongoing basis, rather than for a fixed or temporary period.