An FI Has Long-Term Fixed-Rate Assets Funded by Short-Term Variable-Rate

question 12

Multiple Choice

An FI has long-term fixed-rate assets funded by short-term variable-rate liabilities. To protect the equity value,the FI may engage in a swap to pay a ________ rate and receive a ________ interest.

• A)fixed; variable
• B)variable; variable
• C)variable; fixed
• D)fixed; fixed
• E)None of the options are correct.

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Definitions:

Agent

An individual or entity authorized to act on behalf of another person or entity, known as the principal, in transactions, negotiations, or other legal matters.

Joint And Several Liability

A legal term indicating that each party involved is individually responsible for the entire debt or obligation, as well as collectively with the other parties.

Agent's Torts

Refers to wrongs committed by an agent acting on behalf of a principal that can lead to liability for the agent and potentially the principal.

Principal

The main party to a transaction or contract, often distinguished from an agent who acts on behalf of a principal.