If a bank is exposed to refinancing risk,its profitability is reduced if interest rates ________ and if it is exposed to reinvestment risk,its profitability is reduced if interest rates ________.

Question

Quizplus · Accepted Answer

Refinancing risk affects a bank negatively when interest rates rise, making it more expensive to refinance debt. Reinvestment risk hurts profitability when interest rates fall, as the returns on reinvested funds decrease.

If a Bank Is Exposed to Refinancing Risk,its Profitability Is