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

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Definitions:

Robert Baden-Powell

The British Army officer who founded the Boy Scouts movement in 1908 to support youth physical, mental, and spiritual development.

Moralists

Individuals or thinkers who focus on questions of morality and ethics, often promoting specific values and principles as foundational to good human conduct.

Physical Pleasure

Gratification stemming from tactile sensations or bodily activities, often associated with taste, touch, and other senses.

Rudyard Kipling

An English writer and poet known for his works of fiction and poetry set in the British Empire, including "The Jungle Book" and "If—".