A Bank Has a Negative Repricing Gap

question 12

Multiple Choice

A bank has a negative repricing gap. This implies that

• A)some RSAs are financed by fixed-rate liabilities.
• B)some RSLs are financing fixed-rate assets.
• C)some RSAs are financing equity.
• D)the bank has no fixed-rate assets.

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Definitions:

Average Fixed Cost

The fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced, decreasing as production increases.

Short Run

A period during which at least one factor of production is fixed, affecting a firm's ability to adjust to market changes.

Hold-Up Problems

Situations where one party in a negotiation exploits their bargaining advantage at the expense of others, often after a mutual investment or commitment is made.

Equipment Specific

Pertaining to or designed for particular pieces of equipment, often implying specialized usage or requirements.