For a bank that has a negative duration gap, a decrease in interest rates will cause a(n) _______ in the economic value of assets that is _______ than the _______ in the economic value of liabilities, and a(n) _______ in the economic value of equity.
A) increase, less, increase, decrease
B) increase, greater, increase, decrease
C) increase, less, decrease, increase
D) decrease, less, decrease, increase
E) decrease, greater, decrease, decrease

Question

Quizplus · Accepted Answer

For a bank with a negative duration gap, a decrease in interest rates will cause an increase in the economic value of assets that is less than the increase in the economic value of liabilities, and a decrease in the economic value of equity.

For a Bank That Has a Negative Duration Gap, a Decrease