A Bank Is Liability Sensitive,if Its

question 28

Multiple Choice

A bank is liability sensitive,if its:

• A)deposits and non-deposit borrowings are not affected by changes in interest rates.
• B)interest-sensitive assets exceed its interest-sensitive liabilities.
• C)interest-sensitive liabilities exceed its interest-sensitive assets.
• D)loans and securities are affected by changes in interest rates.
• E)None of the options is correct.

---

Definitions:

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and labor.

Fixed Cost

Expenses that do not change in proportion to the level of production or business activity.

Mixed Cost

A cost that contains both variable and fixed cost elements, changing in total with activity level but not proportionately.

Manufacturing Cost

The total cost incurred by a company to produce goods, including direct materials, direct labor, and manufacturing overhead expenses.