If a bank has a positive gap, interest rate declines improve profitability.

Name: If a bank has a positive gap, interest rate declines improve profitability.
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Question

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A positive gap means a bank has more rate-sensitive assets than liabilities. If interest rates decline, the interest income on assets decreases more than the interest expense on liabilities, potentially reducing profitability.

If a Bank Has a Positive Gap, Interest Rate Declines