If a Bank Attempts to Reduce Exposure to Interest Rate

question 23

Multiple Choice

If a bank attempts to reduce exposure to interest rate risk by replacing long-term marketable securities with more floating-rate commercial loans, it is likely that the bank's

• A)default risk would decrease.
• B)default risk would increase.
• C)liquidity risk would increase.
• D)liquidity risk would decrease.
• E)B and C

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