If interest rates ____, banks with ____ duration gaps will be ____ affected.

Question

Quizplus · Accepted Answer

When interest rates rise, banks with a positive duration gap (where assets mature later than liabilities) will be negatively affected, as the cost of financing their assets increases faster than the interest earned on their liabilities. Conversely, when interest rates decrease, banks with a positive duration gap will be positively affected, as the cost of financing their assets decreases relative to the interest earned on their liabilities.

If Interest Rates ____, Banks with ____ Duration Gaps Will

If Interest Rates , Banks with Duration Gaps Will