A positive gap implies that an increase in interest rates will cause _______ in net interest income.

Question

Quizplus · Accepted Answer

A positive gap means that the bank has more rate-sensitive assets than rate-sensitive liabilities. An increase in interest rates will cause an increase in net interest income in such a scenario because the interest income from the bank's assets will increase more than the interest expense on its liabilities.

A Positive Gap Implies That an Increase in Interest Rates