A Bank Has a Negative Repricing Gap Using a 6-Month

question 40

Multiple Choice

A bank has a negative repricing gap using a 6-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 2-year CDs at current rates to 3-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 2-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 3-month CDs to 2-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 2-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 2-year CDs at current rates.

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