If a bank has a positive dollar gap and interest rates are expected to increase in the near future, the net interest margin of the bank will:
A) increase
B) decrease
C) not change
D) it depends on the duration gap

Question

Quizplus · Accepted Answer

A positive dollar gap means that the bank has more rate-sensitive assets than liabilities. When interest rates rise, the income from these assets will increase more than the expenses on liabilities, leading to an increase in the net interest margin.

If a Bank Has a Positive Dollar Gap and Interest