9-86 What Is the Interest Rate Risk Exposure of the Optimal

question 106

Multiple Choice

9-86 What is the interest rate risk exposure of the optimal transaction in the previous question over the next 2 years?

• A)The risk that interest rates will rise since the FI must purchase a 2-year CD in one year.
• B)The risk that interest rates will rise since the FI must sell a 1-year CD in one year.
• C)The risk that interest rates will fall since the FI must sell a 2-year loan in one year.
• D)The risk that interest rates will fall since the FI must buy a 1-year loan in one year.
• E)There is no interest rate risk exposure.

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Definitions:

Promotional Costs

Expenses associated with marketing and advertising a business's products or services.

Estoppel

A legal principle that prevents a party from contradicting or asserting something contrary to a previous statement or behavior.

Detriment

A loss or harm suffered as a result of an action or a decision.

Adequacy

The sufficiency of something in meeting a specific need or standard, often evaluated in terms of quality or quantity.