During a period of ____ interest rates, a bank's net interest margin will likely ____ if its liabilities are more rate sensitive than its assets

Question

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During a period of decreasing interest rates, a bank's net interest margin will likely decrease if its liabilities are more rate sensitive than its assets. This is because the bank's cost of funds will decrease more quickly than the yield on its loans and investments, leading to a compression of its net interest margin.

During a Period of ____ Interest Rates, a Bank's Net