The following shows the balance sheet for a bank. The manager wants to get an idea about the interest rate risk faced by her bank. She asks the research staff to conduct a basic gap analysis. She is a bit worried about the interest rate risk (because her job depends on how successfully she manages this risk). As a member of the research staff, which of the following actions would you recommend to be taken to reduce the Interest rate risk? Assets (Smillion) Liabilites & NW (Smillion) Rate Sensitive Assets Variable-rate loans $40 Rate Sensitive Liabilities $100 Variable-rate CDs Money market deposit accounts Short-term loans Short-term securities Fixed-Rate Assets $110 Fixed-Rate Liabilities Checkable deposits $50 Reserves Long-term loans Savings deposits Long-term securities Long-term CDs Equity capital There is more than one correct answer. Sell some of your long-term securities and use the proceeds to buy short-term securities Sell some of your short-term securities and use the proceeds to buy long-term securities Try to reduce your long-term loaris and increase your short-term laans. Try to reduce your short-tem loans and increase your long-term loans. Try to reduce your variable-rate CDs and issue more saving accounts Ty to reduce the amount of savings deposits and isue additional variable rate CDs. Reduce the amounts in money market deposit accounts and issue more long-tem CDs Reduce the amounts of long-term CDs and issue more moncy market deposit accounts.
The following shows the balance sheet for a bank. The manager wants to get an idea about the interest rate risk faced by her bank. She asks the research staff to conduct a basic gap analysis. She is a bit worried about the interest rate risk (because her job depends on how successfully she manages this risk). As a member of the research staff, which of the following actions would you recommend to be taken to reduce the Interest rate risk? Assets (Smillion) Liabilites & NW (Smillion) Rate Sensitive Assets Variable-rate loans $40 Rate Sensitive Liabilities $100 Variable-rate CDs Money market deposit accounts Short-term loans Short-term securities Fixed-Rate Assets $110 Fixed-Rate Liabilities Checkable deposits $50 Reserves Long-term loans Savings deposits Long-term securities Long-term CDs Equity capital There is more than one correct answer. Sell some of your long-term securities and use the proceeds to buy short-term securities Sell some of your short-term securities and use the proceeds to buy long-term securities Try to reduce your long-term loaris and increase your short-term laans. Try to reduce your short-tem loans and increase your long-term loans. Try to reduce your variable-rate CDs and issue more saving accounts Ty to reduce the amount of savings deposits and isue additional variable rate CDs. Reduce the amounts in money market deposit accounts and issue more long-tem CDs Reduce the amounts of long-term CDs and issue more moncy market deposit accounts.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 7
The following shows the balance sheet for a bank. The manager wants to get an idea
about the interest rate risk faced by her bank. She asks the research staff to conduct a
basic gap analysis. She is a bit worried about the interest rate risk (because her job
depends on how successfully she manages this risk). As a member of the research
staff, which of the following actions would you recommend to be taken to reduce the
interest rate risk?
Assets (Smillion)
Liabilities & NW (Smillion)
Rate Sensitive Assets
$40 Rate Sensitive Liabilities
$100
Variable-rate loans
Variable-rate CDs
Money market deposit
Jaccounts
Short-term loans
Short-term securities
Fixed-Rate Assets
$110 Fixed-Rate Liabilities
$50
Reserves
Checkable deposits
Long-term loans
Savings deposits
Long-term securities
Long-term CDs
Equity capital
There is more than one correct answer.
Sell some of your lone-term securities and use the proceeds to buy short-term
securities.
Sell some of your short-term securities and use the proceeds to buy long-term
securities
Try to reduce your long-term loans and increase your short-term loans.
O Try to reduce your short-tem loans and increase your long-term loans.
Try to reduce your variable-rate CDs and issue more saving accounts.
Try to reduce the amount of savings deposits and issue additional variable-rate CDs.
Reduce the amounts in money market deposit accounts and issue more long-tem CDs
Reduce the amounts of long-tem CDs and issue more money market deposit accounts.
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