Aggressive gap management that successfully increases the net interest income of the bank may well decrease shareholder wealth, all else the same, because:
A) bank risk may decrease
B) bank risk may increase
C) bank return on assets may increase
D) bank return on assets may decrease

Question

Quizplus · Accepted Answer

Aggressive gap management, which involves taking on more interest rate risk to increase net interest income, may well increase the overall risk faced by the bank. Higher risk can lead to a decrease in shareholder wealth if the risk-adjusted return is not commensurate with the increased risk.

Aggressive Gap Management That Successfully Increases the Net Interest Income