What is the FI's interest rate risk exposure?
A)Exposed to increasing rates.
B)Exposed to decreasing rates.
C)Perfectly balanced.
D)Exposed to long-term rate changes.

Question

Quizplus · Accepted Answer

The FI is exposed to increasing rates, as they have a mismatch between their assets and liabilities. If rates increase, the cost of funding their liabilities will rise faster than the income from their assets, leading to a decrease in net interest income.

What Is the FI's Interest Rate Risk Exposure