A Bank Has a Negative Repricing Gap and Estimates That

question 28

Multiple Choice

A bank has a negative repricing gap and estimates that the spread between RSAs and RSLs will move inversely with interest rates. If interest rates increase,NII will

• A)rise.
• B)fall.
• C)be unchanged.
• D)rise or fall depending on the size of the spread effect relative to the size of the CGAP effect.

---

Definitions:

Total Revenue

The total income received by a firm from selling its goods or services, calculated as the quantity sold multiplied by the selling price per unit.

Short-Run Supply Curve

A supply curve that shows the quantity of a product a firm in a purely competitive industry will offer to sell at various prices in the short run; the portion of the firm’s short-run marginal cost curve that lies above its average-variable-cost curve.

Marginal Cost Curve

A graph that shows the relationship between the marginal cost of producing an additional unit and the quantity of that unit produced.

Supply Curve

A visual chart that illustrates how the price of an item correlates with the amount of the item that sellers are prepared to offer.