A Bank's Balance Sheet Is Characterized by Long-Term Fixed-Rate Assets

question 43

Multiple Choice

A bank's balance sheet is characterized by long-term fixed-rate assets funded by short-term variable-rate liabilities. Most likely the bank has a

• A)positive repricing gap and a positive duration gap.
• B)positive repricing gap and a negative duration gap.
• C)negative repricing gap and a positive duration gap.
• D)negative repricing gap and a negative duration gap.

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Definitions:

Liquidity

The measure of how quickly and easily an asset can be converted into cash without significant loss of value.

Current Liabilities

Current liabilities are a company's debts or obligations that are due to be paid to creditors within one fiscal year.

Notes Payable

Written promises to pay a specified amount of money, typically with interest, by a certain date.

Maturity Value

The total amount that will be paid to the investor at the end of a fixed income security's term, including principal and interest.