All else the same,if a bank's liabilities are more sensitive to interest rate fluctuations than are its assets,then ________ in interest rates will ________ bank profits.
A)an increase;increase
B)an increase;reduce
C)a decline;reduce
D)a decline;not affect

Question

Quizplus · Accepted Answer

If liabilities are more sensitive to interest rate fluctuations than assets, then an increase in interest rates will result in higher interest expense on liabilities and lower interest income on assets, leading to a reduction in bank profits.

All Else the Same,if a Bank's Liabilities Are More Sensitive