How Do You Interpret the Position of an FI with a Positive

question 35

Multiple Choice

How do you interpret the position of an FI with a positive on-balance-sheet gap and a negative off-balance sheet gap?

• A)The FI uses its on-balance-sheet activities to hedge its off-balance-sheet activities.
• B)The FI uses its off-balance-sheet activities to hedge its on-balance-sheet activities.
• C)The FI believes that interest rates will increase and made a mistake in setting its gap for off-balance-sheet activities.
• D)The FI believes that interest rates will increase and made a mistake in setting its gap for on-balance-sheet activities.

---

Definitions:

Situational Attribution

The process of attributing behavior to external or environmental factors, rather than internal characteristics.

Fundamental Attributional Error

The fundamental attributional error is a cognitive bias that leads individuals to overemphasize personality traits and underestimate situational factors when explaining others' behaviors.

Stable Characteristics

Traits or attributes of an individual that are consistent over time and across situations.

Internal Characteristics

Traits, qualities, or features that originate from within an individual, shaping their behavior and personality.