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

Question

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When interest rates rise, the bank's cost of funds increase while the yield on earning assets does not increase as much, leading to a decline in net interest income and therefore, bank profits. The impact on bank profits will depend on the size and sensitivity of the bank's assets and liabilities. Given the limited information provided, it is reasonable to assume that the bank has more rate-sensitive liabilities than assets, resulting in a decline of $1.5 million in profits.

If Interest Rates Rise by 5 Percentage Points,say,from 10 to 15