What will happen to the profit of bank when interest rates increase if the bank is holding mostly fixed rate assets and mostly variable rate liabilities?
A) Profit will decrease because the cost of liabilities will increase faster than the earnings on assets.
B) Profit will increase when interest rates increase.
C) It is impossible to tell what will happen to profit.
D) None of the above is correct.
Correct Answer:
Verified
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A)are subject to reserve requirements but
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