A Liability Sensitive Bank Decides to Reduce Risk by Marketing

question 44

Multiple Choice

A liability sensitive bank decides to reduce risk by marketing 2-year CDs paying 5% instead of NOW accounts that pay 4%. The bank will benefit if:

• A) the 2-year rate in one year is less than 5%.
• B) the 1-year rate in one year is less than 6%.
• C) the 1-year rate in one year is greater than 6%.
• D) the 2-year rate in one year is greater than 6%.
• E) Not enough information is given to determine the correct answer.

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Definitions:

Attractive Opportunity

A business or investment prospect that is both appealing and likely to yield positive outcomes or profits.

Sales

The process of selling goods or services to customers in exchange for money or other valuable considerations.

Behavioral Segmentation

The division of a market into groups based on consumer behaviors, such as purchasing habits or product usage.

Usage Rate

The frequency at which a consumer uses a product or service over a specific period, indicating their level of engagement or reliance on it.