A Bank Has a Negative Repricing Gap Using a Six-Month

question 2

Multiple Choice

A bank has a negative repricing gap using a six-month maturity bucket. Which one of the following statements is most correct if MMDAs are rate-sensitive liabilities?

• A)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from two-year CDs at current rates to three-month CDs.
• B)If all interest rates are projected to decrease,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from MMDAs to two-year CDs at current rates.
• C)If all interest rates are projected to decrease,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from three-month CDs to two-year CDs at current rates.
• D)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from two-year CDs at current rates to MMDAs.
• E)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from MMDAs to two-year CDs at current rates.

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Definitions:

Financialized

A term describing how financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes.

Financial Activities

These involve transactions related to the management, investment, transfer, and expenditure of money by individuals, businesses, and governments.

Lending

The act of providing funds to another party with the expectation that the funds will be repaid, often with interest, at a later date.

Corporate Codes

Policies or guidelines established by companies to dictate behavior, ethics, and responsibilities within the corporate environment.