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:

Direct Materials

The raw materials that are directly traceable to the manufacturing of a product and are integral to its production.

Direct Labour

The amount of effort contributed by employees who work directly on manufacturing a product or delivering a service.

Factory Overhead

Indirect costs associated with manufacturing, including costs of utilities, maintenance, and factory equipment depreciation.

Variable Expenses

Costs that change in proportion to business activity or output levels, such as materials costs and utility expenses directly linked to production.