An FI would normally purchase a cap if it was funding fixed-rate assets with variable-rate liabilities.

Name: An FI would normally purchase a cap if it was funding fixed-rate assets with variable-rate liabilities.
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This is because a cap serves as a form of interest rate insurance, protecting the FI from potential increases in interest rates on its variable-rate liabilities. If interest rates do increase, the cap will provide a payout to help offset the increased cost of funding the fixed-rate assets.

An FI Would Normally Purchase a Cap If It Was