A Bank Makes Long-Term Fixed-Rate Loans, and Funds Itself with Short-Term

question 16

Multiple Choice

A bank makes long-term fixed-rate loans, and funds itself with short-term deposits. It can best manage its vulnerability to interest rate changes by

• A) Entering into a basis (floating-floating) swap.
• B) Entering into a pay-floating/receive-fixed interest rate swap.
• C) Entering into a pay-fixed/receive-floating interest rate swap.
• D) Entering into a fixed-fixed swap where the two legs have different payment frequencies.

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Definitions:

Negligent

Failing to take appropriate care in doing something, which results in damage or harm to another party.

Anticipated Injury

Anticipated injury refers to harm or damage that is expected or foreseen as a result of certain actions or omissions.

Good Samaritan Law

Good Samaritan Laws are legal protections designed to encourage people to offer assistance to others in distress by granting them immunity from certain forms of legal liability.

Independent Contractor

An individual or business that provides goods or services to another entity under terms specified in a contract, distinct from an employee due to the contractor’s control over their work.