Since Most Banks Have Positive Gaps and Negative Duration Gaps,an

question 14

Multiple Choice

Since most banks have positive gaps and negative duration gaps,an increase in market interest rates will

• A) increase bank profits and increase bank capital.
• B) increase bank profits and decrease bank capital.
• C) decrease bank profits and increase bank capital.
• D) decrease bank profits and decrease bank capital.

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Definitions:

Inventories

Quantities of goods that are held by a company for the purpose of resale or production.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to arrive at operating cash flow.

Accounts Receivable

Funds that clients or customers owe to a company for products or services delivered but not yet compensated for.

Accounts Payable

Liabilities of a business that are due to suppliers and creditors within the short term, typically less than a year.