Which of the Following Would Require a Short Hedge

question 21

Multiple Choice

Which of the following would require a short hedge?

• A)The bank has a positive gap in three months.
• B)The bank anticipates receiving the repayment of a $30 million loan in 2 months.The funds will be rolled over immediately.
• C)The bank is going to invest a large amount of money in Treasury bills.
• D)The bank has a negative duration gap.
• E)The bank plans to roll variable-rate CDs over into fixed-rate CDs.

---

Definitions:

Interest-Rate Cost of Borrowing

The cost associated with borrowing funds, typically expressed as a percentage of the amount borrowed.

R&D Expenditure

Funds allocated by a business or government towards research and development projects to innovate or improve products or services.

Added Profit

The additional profit generated from an activity or investment beyond the usual or expected return.

Expected-Rate-of-Return-Curve

A graphical representation that shows the relationship between the expected return on investment and the level of investment risk.