Question: On-balance sheet hedging, which involves matching foreign assets and foreign liabilities, can help a financial institution (FI) hedge against foreign exchange risk because if the

On-balance sheet hedging, which involves matching foreign assets and foreign liabilities, can help a financial institution (FI) hedge against foreign exchange risk because if the domestic currency depreciates relative to the foreign currency, the FI will pay _________ on the liability side but they will also receive ___________ on the asset side and if the domestic currency appreciates relative to the foreign currency, the FI will receive ________ on the asset side but they will also pay ________ on the liability side.

More; more; less; less

More; less; less; more

Less; less; more; more

Less; more; less; more

More; more; less; more

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