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

question 60

Multiple Choice

How do you interpret the position of an FI with a negative on-balance-sheet gap and a positive 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 decrease and made a mistake in setting its gap for off-balance-sheet activities.
• D)The FI believes that interest rates will decrease and made a mistake in setting its gap for on-balance-sheet activities.