If a Bank Has Short-Term Deposits and Provides Long-Term Fixed-Rate

question 16

Multiple Choice

If a bank has short-term deposits and provides long-term fixed-rate loans, and interest rates decline over time, its net interest margin should be

• A)declining over time.
• B)rising over time.
• C)constant over time.
• D)consistently negative.

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Definitions:

Time Lines

Schedules or timelines outlining the sequence and duration of tasks or events.

Cash Flows

The sum of funds flowing in and out of a company, particularly influencing its ability to cover short-term obligations.

Annuities

Financial products that pay out a fixed stream of payments to an individual, typically used as a retirement strategy.

Periodic Interest Rate

The interest rate charged or earned over a particular period of time, less than a year, on a loan or investment.