How Can a Bank Hedge When It Makes 1-Year Fixed-Rate

question 58

Multiple Choice

How can a bank hedge when it makes 1-year fixed-rate loans and finances them with 3-month floating-rate deposits?

• A) Buy Eurodollar futures contracts.
• B)Sell put options on Eurodollar futures contracts.
• C) Sell Eurodollar futures contracts.
• D) Buy call options on Eurodollar futures contacts.
• E) b. and c.

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Definitions:

Suburbanization

The process of population movement from within cities to the outskirts, resulting in the growth and development of suburban areas.

Suburban-Industrial Complex

A term describing the interconnected development of suburban living and industrial growth, often indicating a mixed-use area with both residential and industrial facilities.

Consumer Culture

A form of capitalism characterized by the promotion of the consumer's interests and the theory that an increasing consumption of goods is economically beneficial.

Soviet Government

The political system that governed the Union of Soviet Socialist Republics (USSR), characterized by its single-party rule under the Communist Party.