QUESTION 42

A banks rate-sensitive assets EXCEED its rate-sensitive liabilities by $500,000. What implication would this gap have on its net interest income? [I] Net interest income will fall if rates fall [II] Net interest income will fall if rates rise [III] Net interest income will rise if rates fall [IV] Net interest income will rise if rates rise

		I and IV
		II and III
		II and IV
		II and III

1 points

QUESTION 43

A banks rate-sensitive assets EXCEED its rate-sensitive liabilities by $500,000. What can the bank do to hedge its interest rate risk exposure using interest rate swap?

		Pay fixed rate on $0.5m and receive floating
		Pay floating rate on $0.5m and receive fixed
		Pay floating rate on $0.5m and receive fixed equal to the change in interest income
		Pay fixed rate on $0.5m and receive floating equal to the change in interest income