A Bank's Assets Tend to Be Long-Term While Its Liabilities

question 21

Multiple Choice

A bank's assets tend to be long-term while its liabilities are short-term. Therefore, when interest rates rise, the value of the bank's assets:

• A) increases by more than the value of its liabilities.
• B) will decrease by more than the value of its liabilities.
• C) increases and the value of its liabilities decreases.
• D) decreases and the value of its liabilities increases.

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Definitions:

Discrete Random Variables

Variables in statistical analysis that can take on a countable number of distinct values, often representing occurrences.

Continuous Random Variables

Variables that can take on an infinite number of values within a given range.

Probability Density

A function that describes the relative likelihood for a random variable to take on a given value.

Probability Density Function

A mathematical expression that defines the probability of a continuous random variable assuming a specific value.