An ADI That Has Borrowed on a Fixed-Rate Basis and Lent

question 74

True/False

An ADI that has borrowed on a fixed-rate basis and lent on a floating-rate basis is exposed to interest rate risk.

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Definitions:

Resistance

A material's opposition to the flow of electric current, measured in ohms.

Self-induction

The property of a circuit or coil that causes it to induce a voltage in itself as a result of a change in current flow, affecting the circuit's own current.

Electro-magnetism

A branch of physics involving the study of electromagnetic forces generated by the interaction between electric charges and currents.

Electro-magnetic Induction

The process by which an electric current is generated in a conductor when it is subjected to a varying magnetic field.