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Suppose that Bank C is offering the following deposit and mortgage rates to their customers: Maturity Deposit rate Mortgage rate 1 year 4% 6% 5
Suppose that Bank C is offering the following deposit and mortgage rates to their customers:
Maturity | Deposit rate | Mortgage rate |
1 year | 4% | 6% |
5 years | 2% | 5% |
Assess the banks interest rate risk when interest rates increase by 3% for the first two years and discuss a strategy to eliminate the risk if any.
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