A Bank with Short-Term Floating-Rate Assets Funded by Long-Term Fixed-Rate

question 17

Multiple Choice

A bank with short-term floating-rate assets funded by long-term fixed-rate liabilities could hedge this risk by
I. buying a T-bond futures contract.
II. buying options on a T-bond futures contract.
III. entering into a swap agreement to pay a fixed rate and receive a variable rate.
IV. entering into a swap agreement to pay a variable rate and receive a fixed rate.

• A)I and III only
• B)I,II,and IV only
• C)II and IV only
• D)III only
• E)IV only

---

Definitions:

Traditional View

A perspective or belief that adheres to long-established practices or interpretations.

Syllogism Validity

The measure of whether a deductive argument is logically sound, where the conclusion necessarily follows from the premises.

Traditional View

The traditional view often refers to the long-established or conventional perspective on a subject.

Existential Import

the implication that something exists, commonly discussed in the context of categorical statements or propositions in logic.