A Financial Institution Can Hedge Its Interest Rate Risk By

question 9

Multiple Choice

A financial institution can hedge its interest rate risk by:

• A)matching the duration of its assets to the duration of its liabilities.
• B)setting the duration of its assets equal to half that of the duration of its liabilities.
• C)matching the duration of its assets,weighted by the market value of its assets with the duration of its liabilities,weighted by the market value of its liabilities.
• D)setting the duration of its assets,weighted by the market value of its assets to one half that of the duration of the liabilities,weighted by the market value of the liabilities.
• E)setting the duration of its assets equal to 1.0.

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