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Assume that as part of the asset transformation process a bank takes in short term deposits with a maturity less than one year and transforms
Assume that as part of the asset transformation process a bank takes in short term deposits with a maturity less than one year and transforms it into a year mortgage loan to a customer. Is this example considered to be short funded or long funded? Would the bank be exposed to refinancing risk or reinvestment risk? What movement in interest rates will negatively impact the bank?
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