-If interest rates rise by 5 percentage points, say from 10 to 15 percent, bank profits (measured using basic gap analysis) will ________.

Question

Quizplus · Accepted Answer

Basic gap analysis assesses the difference between the amounts of rate-sensitive assets and rate-sensitive liabilities. If interest rates rise, and a bank has more rate-sensitive liabilities than assets, its net interest income, and thus profits, will decline. The specific amount (e.g., $0.5 million) would depend on the bank's exact gap and the size of the interest rate change.

-If Interest Rates Rise by 5 Percentage Points, Say from 10