Use the following to answer this question: A $=$ Assets, L $=$ Liabilities

A bank has DurA $=1\mathrm{.}20$ years and DurL $=0\mathrm{.}65$ years. The bank has total equity of $$115$ million and total assets of $$920$ million. Interest rates are at $7\%.$

To reduce this bank$$s interest rate risk they could

I. Increase the amount of adjustable rate mortgages relative to fixed rate mortgages

II$.$ Issue long term bonds to replace maturing short term note liabilities

III. Replace $5$ year CD liabilities with $6$ month CD liabilities

Question $20$Answer

a$.$

II and III only

b$.$

I, II and III

c$.$

I and III only

d$.$

I only

e$.$

I and II only