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If we were to design a macrohedge, which of the following positions would help reduce the bank's interest rate risk? I. Long position in bond futures contracts II. Buying put options on bonds III. Purchasing an interest rate cap Multiple Choice I only II only III only I and III only II and III only

If we were to design a macrohedge, which of the following positions would help reduce the bank's interest rate risk? I. Long position in bond futures contracts II. Buying put options on bonds III. Purchasing an interest rate cap Multiple Choice I only II only III only I and III only II and III only

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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If we were to design a macrohedge, which of the following positions would help reduce the bank's interest rate risk?

  1. I. Long position in bond futures contracts
  2. II. Buying put options on bonds
  3. III. Purchasing an interest rate cap

Multiple Choice

  • I only

  • II only

  • III only

  • I and III only

  • II and III only

After conducting a rate-sensitive analysis, a bank finds itself with the following amounts of rate-sensitive assets and liabilities (RSAS and RSL) and fixed-rate assets and liabilities (FRAS and FRLS); the rate of return and cost rates on the accounts are also given: Assets Amount Liabilities Amount (million S) & Equity (million S) RSAS @ 4.25% 322 RSLS @ 3.11% 200 FRAS @ 5.15% 700 FRLS @ 4.95% 800 NEA 120 Equity 142 Total 1,142 Total 1,142 %24 %24 %24
Transcribed Image Text:After conducting a rate-sensitive analysis, a bank finds itself with the following amounts of rate-sensitive assets and liabilities (RSAS and RSL) and fixed-rate assets and liabilities (FRAS and FRLS); the rate of return and cost rates on the accounts are also given: Assets Amount Liabilities Amount (million S) & Equity (million S) RSAS @ 4.25% 322 RSLS @ 3.11% 200 FRAS @ 5.15% 700 FRLS @ 4.95% 800 NEA 120 Equity 142 Total 1,142 Total 1,142 %24 %24 %24
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