The sensitivity of cost of funds to interest rate movements has been
A)greater for credit unions than savings institutions.
B)greater for credit unions than commercial banks.
C)lower for credit unions than for savings institutions or commercial banks.
D)similar for credit unions as savings institutions and commercial banks.

Question

Quizplus · Accepted Answer

Credit unions are member-owned financial cooperatives that typically offer lower interest rates on loans and higher interest rates on deposits compared to commercial banks and savings institutions. As a result, they tend to have lower sensitivity to interest rate movements in their cost of funds. Savings institutions and commercial banks, on the other hand, rely more heavily on interest income from loans and investments, so their cost of funds tends to be more sensitive to interest rate changes.

The Sensitivity of Cost of Funds to Interest Rate Movements