Bruce the Bank Manager can reduce interest rate risk by_____ the duration of the bank's assets to increase their rate sensitivity or, alternatively, _____ the duration of the bank's liabilities. Question 6 options: A) shortening; shortening B) lengthening; lengthening C) shortening; lengthening D) lengthening; shortening

Bruce the Bank Manager can reduce interest rate risk by_ the duration of the bank's assets to increase their rate sensitivity or, alternatively, _ the duration of the bank's liabilities. Question 6 options: A) shortening; shortening B) lengthening; lengthening C) shortening; lengthening D) lengthening; shortening

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter28: Monetary Policy And Bank Regulation

Section: Chapter Questions

Problem 33CTQ: The term moral hazard describes increases in risky behavior resulting from efforts to make that...

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

Bruce the Bank Manager can reduce interest rate risk by_____ the duration of the bank's assets to increase their rate sensitivity or, alternatively, _____ the duration of the bank's liabilities.

Question 6 options:

A)	shortening; shortening

B)	lengthening; lengthening

C)	shortening; lengthening

D)	lengthening; shortening

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