A Bank Has a Positive Duration Gap

question 54

Multiple Choice

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

Recognize the early expressions and discussions around concepts of liberty and rights as precursors to the revolutionary ideology.

Understand the key figures and their roles during the Revolutionary period.

Identify the advantages and strategies that contributed to the American victory in the Revolutionary War.

Recognize the influence of key philosophical ideas on the Declaration of Independence.

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Definitions:

Target Capital Structure

The mix of debt, preferred stock, and common equity that a company aims to hold to minimize its cost of capital and maximize its market value.

Forecasted Net Income

Forecasted net income is an estimate of a company's future profits after all expenses and taxes have been subtracted from revenues.

Total Dividends

The sum of all dividend payments made by a company to its shareholders over a specified period, usually a fiscal year.

Residual Dividend Policy

A policy wherein dividends are based on the earnings left over after all operating expenses and expansion projects are funded.