9-84 What is the FI's interest rate risk exposure?
A)Exposed to increasing rates.
B)Exposed to decreasing rates.
C)Perfectly balanced.
D)Exposed to long-term rate changes.
E)Insufficient information.

Question

Quizplus · Accepted Answer

The passage states that the FI has a larger amount of long-term, fixed-rate assets and a smaller amount of short-term liabilities. This puts the FI at risk if interest rates were to increase, as the value of their fixed-rate assets would decrease while their liabilities would remain the same. Therefore, the FI is exposed to increasing rates.

9-84 What Is the FI's Interest Rate Risk Exposure