Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Methods/instruments that banks use to hedge the risks pertaining loans
Expert Solution
Step 1
Main function of a bank is to accept deposit and then offer loans as both individual and business loan. They earn higher interest from loan and pay lower interest on deposits. Since the majority of the income for banks are loans, it is essential for them to hedge the cash flow from these loans
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