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Question
A bank has a negative duration gap. Which one of the following statements is most correct?
A. If all interest rates are projected to increase, to limit a net value decline, before rates rise the bank should increase the amount of short-term loans on the balance sheet.
B. If all interest rates are projected to increase, to limit a net value decline, before rates rise the bank should increase the amount of short-term bonds issued by the bank.
C. If all interest rates are projected to decrease, to limit a net value decline, before rates fall the bank should increase the amount of long-term loans on the balance sheet.
D. If all interest rates are projected to decrease, to limit a net value decline, before rates fall the bank should increase the amount of long-term bonds issued by the bank.
Answer
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