8-21 If the spread between rate sensitive assets and rate sensitive liabilities increases for a bank,future changes in interest rates will lead to an increase in net interest income.

Question

Quizplus · Accepted Answer

When the spread between rate sensitive assets and rate sensitive liabilities increases, a bank's net interest margin widens. This means the bank earns more interest income on its assets than it pays on its liabilities. As a result, future increases in interest rates will lead to an increase in net interest income as the bank earns more interest income while its interest expenses remain relatively stable.

8-21 If the Spread Between Rate Sensitive Assets and Rate