22-20 an FI with a Negative Duration Gap Is Exposed

question 94

True/False

22-20 An FI with a negative duration gap is exposed to interest rate declines and could hedge its interest rate risk by buying forward contracts.

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Definitions:

Total Fixed Cost

It encompasses all the expenses that do not change regardless of the business activity volume, such as rent and salaries.

Servicing Materials

Supplies or materials used in the maintenance and repair of products or equipment.

Planning Budget

A budget created at the beginning of the budgeting period that is valid for a planned level of activity.

Fixed Cost

A cost that does not change with the level of production or sales volume, remaining constant even when output varies.