Banks can increase their potential interest revenues by restructuring their asset portfolio to contain less ____ and more ____.

Question

Quizplus · Accepted Answer

By reducing their holdings of low-yielding Treasury bonds and increasing their exposure to higher-yielding commercial loans, banks can boost their potential interest revenues. This is because the interest rate on commercial loans is typically higher than that on Treasury bonds, which are considered a safe haven asset. By taking on more risk, banks can increase their potential returns. Holding excess reserves does not generate significant interest income, so this option is not as effective for boosting interest revenues. Consumer loans and Treasury bills may also generate some interest income, but not as much as commercial loans.

Banks Can Increase Their Potential Interest Revenues by Restructuring Their