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Question
A bank has a positive repricing gap using a 6-month maturity bucket. Which one of the following statements is most correct?
A. If all interest rates are projected to increase, to limit a profit decline when this occurs, the bank could encourage its retail loan customers to switch from 1-year adjustable rate loans to Fed Funds loans.
B. If all interest rates are projected to decrease, to limit a profit decline when this occurs, the bank could encourage its retail loan customers to switch from 1-month reset floating rate loans to 3-year fixed-rate loans 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 loan customers to switch from fixed-rate mortgages to adjustable rate mortgages.
D. If all interest rates are projected to increase, to limit a profit decline when this occurs, the bank could encourage its retail loan customers to switch from 3-year to 5-year auto loans.
E. If all interest rates are projected to decrease, to limit a profit decline when this occurs, the bank could encourage its retail loan customers to switch from their bank to another bank.
Answer
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