If a Bank's Liabilities Are More Sensitive to Interest Rate

question 48

Multiple Choice

If a bank's liabilities are more sensitive to interest rate movements than are its assets,then

• A)an increase in interest rates will reduce bank profits.
• B)a decrease in interest rates will reduce bank profits.
• C)interest rates changes will not impact bank profits.
• D)an increase in interest rates will increase bank profits.

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Definitions:

Binomial Probability Distribution

A probability distribution that summarises the likelihood that a value will take one of two independent values under a given set of parameters or assumptions.

Probability Of Success

Refers to the chance that a given event will occur, often denoted in statistics by the symbol p.

Probability Of Failure

The probability that a system or component will not execute its designated purpose as expected.

Expected Value

A calculated average or mean of all possible outcomes of a random variable, considering the probabilities of each outcome.