How Do You Interpret the Position of an FI with a Positive

question 35

Multiple Choice

How do you interpret the position of an FI with a positive on-balance-sheet gap and a negative off-balance sheet gap?

• A)The FI uses its on-balance-sheet activities to hedge its off-balance-sheet activities.
• B)The FI uses its off-balance-sheet activities to hedge its on-balance-sheet activities.
• C)The FI believes that interest rates will increase and made a mistake in setting its gap for off-balance-sheet activities.
• D)The FI believes that interest rates will increase and made a mistake in setting its gap for on-balance-sheet activities.

---

Definitions:

Animate

To bring to life or to give motion to something, often referring to the process of making inanimate objects or characters appear alive, as in animation.

Operational

Pertaining to or involving the practical application of ideas, procedures, and processes rather than theoretical aspects.

Centered

Focuses on placing importance or emphasis on a particular element or aspect in a context or situation.

Mental Module

The concept of specialized, domain-specific regions or networks in the brain responsible for various cognitive functions.