What Kind of Interest Rate Swap (Of Liabilities)would an FI

question 10

Multiple Choice

What kind of interest rate swap (of liabilities) would an FI with a positive funding gap utilize to hedge interest rate risk exposure?

• A)Swap floating-rate payments for fixed-rate payments.
• B)Swap floating-rate receipts for fixed-rate payments.
• C)Swap fixed-rate receipts for floating-rate receipts.
• D)Swap floating-rate receipts for fixed-rate receipts.

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Definitions:

Progressive Rate

A tax system in which the tax rate increases as the taxable income increases.

Average Tax Rate

The proportion of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the taxpayer’s total income.

Tax Liability

The total amount of tax owed to the government by an individual, corporation, or other entity in a specified tax period.

Form 1040EZ

A simplified tax form for individuals with straightforward financial situations, allowing them to report income and calculate taxes owed.