A Bank Has a Negative Repricing Gap Using a Six-Month

question 2

Multiple Choice

A bank has a negative repricing gap using a six-month maturity bucket. Which one of the following statements is most correct if MMDAs are rate-sensitive liabilities?

• A)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from two-year CDs at current rates to three-month CDs.
• B)If all interest rates are projected to decrease,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from MMDAs to two-year CDs at current rates.
• C)If all interest rates are projected to decrease,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from three-month CDs to two-year CDs at current rates.
• D)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from two-year CDs at current rates to MMDAs.
• E)If all interest rates are projected to increase,to limit a profit decline when this occurs,the bank could encourage its retail deposit customers to switch from MMDAs to two-year CDs at current rates.

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