Your bank is asset-sensitive (i.e. has more RSA than RSL) in the short run (0 to 5 years) but liability-sensitive in the long run (5 to 10 years).

a)If the yield curve is humped as shown in Figure A, are you concerned about any interest rate risk exposure for your bank?Explain.

b)If the yield curve is upward sloped all the way to year 10 as shown in Figure B, then how (if any) would your bank be exposed to interest rate risk in the short run? in the longrun?

c)If you ever decide to use a swap agreement to hedge the risk identified above, will you be a fixed-rate payer or receiver in theswap?