A Bank with Long-Term Fixed-Rate Assets Funded with Short-Term Rate-Sensitive

question 60

Multiple Choice

A bank with long-term fixed-rate assets funded with short-term rate-sensitive liabilities could do which of the following to limit their interest rate risk?
I. Buy a cap.
II. Buy an interest rate swap.
III. Buy a floor.
IV. Sell an interest rate swap.

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

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Definitions:

Corporate Social Responsibility (CSR)

A strategy in business that promotes sustainable development through the provision of economic, social, and environmental advantages for every stakeholder involved.

Organic Products

Goods produced through farming practices that avoid the use of synthetic chemicals, antibiotics, and genetically modified organisms (GMOs).

Economic Responsibilities

The obligations of an organization or individual to contribute positively to the economic system in which they operate.

Corporate Social Responsibility

A business model that integrates self-regulatory mechanisms whereby companies ensure their activities positively impact society.