If a Bank Has Long-Term Fixed-Rate Assets and Short-Term Liabilities

question 22

Multiple Choice

If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should

• A)decrease.
• B)increase.
• C)stay the same.
• D)EITHER decrease OR increase, depending on whether the asset maturities exceed 10 years.

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Definitions:

Sulfuric Acid

A highly corrosive mineral acid with the chemical formula H2SO4, used in various industrial processes and as a chemical reagent.

Industrial Mineral

Minerals that are mined and processed for their non-metallic properties, used in a variety of industrial applications.

Batteries

Electrochemical cells that convert stored chemical energy into electrical energy, used as a power source for numerous devices.

Acetic Acid

An organic compound with the chemical formula CH3COOH, which is a clear, sour-tasting liquid that is the main component of vinegar apart from water.