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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