A review of the assets of a bank may indicate that the bank has a substantial investment in long-term bonds.Such an investment could reflect substantial risk if interest rates increase.

Question

Quizplus · Accepted Answer

If interest rates increase, the value of existing long-term bonds will decrease, resulting in a potential loss for the bank. Therefore, a substantial investment in long-term bonds could reflect substantial risk if interest rates increase.

A Review of the Assets of a Bank May Indicate