Final answer:
A bank manager can adjust the bank's six-month repricing gap by lengthening the average maturity of assets or shortening the average maturity of liabilities to take advantage of an anticipated rise in interest rates.
Step-by-step explanation:
When a bank manager expects interest rates to rise within the next six months, they can adjust the bank's six-month repricing gap to take advantage of this anticipated rise by lengthening the average maturity of assets or shortening the average maturity of liabilities. By doing so, the bank can benefit from higher interest income on its assets while paying lower interest on its liabilities.
For example, the bank manager can shift the bank's portfolio towards longer-term loans or investments that offer higher interest rates. At the same time, they can reduce the bank's reliance on short-term funding sources with higher interest rates, such as deposits with variable interest rates.
By adjusting the bank's repricing gap in anticipation of rising interest rates, the bank manager can position the bank to maximize its profitability.