If Second National Bank Has More Rate-Sensitive Assets Than Rate-Sensitive

question 23

Multiple Choice

If Second National Bank has more rate-sensitive assets than rate-sensitive liabilities,it can reduce interest-rate risk with a swap which requires Second National to

• A) pay a fixed rate while receiving a floating rate.
• B) receive a fixed rate while paying a floating rate.
• C) both receive and pay a fixed rate.
• D) both receive and pay a floating rate.

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Definitions:

Solvent

A substance that dissolves a solute, resulting in a solution; usually a liquid but can also be a solid or gas.

Water

A clear, flavorless, scentless, and almost invisible chemical compound that primarily makes up the waters of Earth's rivers, lakes, and seas.

Electronegativity

A measure of an atom's ability to attract and hold electrons, influencing the bond type and polarity among atoms.

Electrons

Subatomic particles with a negative charge, found in all atoms and playing essential roles in electricity, chemistry, and bonding.