Question
Why do banks offer loans and deposits that provide borrowers and depositors with embedded options? a.It reduces the banks interest rate risk. b.The FDIC requires
Why do banks offer loans and deposits that provide borrowers and depositors with embedded options?
a.It reduces the banks interest rate risk.
b.The FDIC requires they do so.
c.They can charge or pay rates they believe compensates them for the additional risk.
d.To reduce their RSLs when they believe the Federal reserve will increase short term rates.
e.It helps them to predict future interest rates.
When interest rates decline, a banks mortgage borrowers will tend to:
a.Refinance their mortgages more quickly, which increases the banks GAP.
b.Refinance their mortgages more quickly, which reduces the banks GAP.
c. their mortgages more slowly, which increases the banks GAP.
d.Refinance their mortgages more slowly, which reduces the banks GAP.
e.Neither increase nor decrease their rate of refinancing, but the banks GAP will still increase
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