Question
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 30 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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Answer this example is considered to be short funded the bank be exposed to refinancing risk Refinancing risk refers to the possibility that a borrowe...
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Fundamental Accounting Principles Volume 1
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann
15th Canadian Edition
1259259803, 978-1259259807
