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.

---

Definitions:

Voluntary Exchange

A transaction where two parties mutually agree to trade goods, services, or resources, typically to the perceived benefit of both.

Marginal Rate

The rate of change in cost, output, or benefit as a result of a one-unit increase in an input.

Impliedly Authorized

Actions or decisions that are not explicitly stated but are inferred as permitted within the scope of someone's authority.

Bankruptcy Petition

A formal request filed in court by an individual or business declaring inability to pay outstanding debts, seeking relief under bankruptcy laws.