📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      If ABC Bank is encouraging its home loan borrowers to

      shift to a floating rate option, the bank is likely to be _______
      A Trying to maximize interest income from home loans Correct Answer Incorrect Answer
      B Expecting home loan rates to go down in near future Correct Answer Incorrect Answer
      C Trying to imitate the international best practices in interest rates Correct Answer Incorrect Answer
      D Reduce asset sensitivity to interest rates in home loan segment Correct Answer Incorrect Answer
      E None of these Correct Answer Incorrect Answer

      Solution

      By making home loans on floating basis, the bank is increasing it long term rate sensitive assets which would reduce the negative gap between rate sensitive assets and liabilities thereby reducing the liquidity risk for the bank.

      Practice Next
      More Financial Management Questions

      Relevant for Exams:

      ask-question