If a Bank Has a Positive GAP, an Increase in Interest

question 28

Multiple Choice

If a bank has a positive GAP, an increase in interest rates will cause interest income to __________, interest expense to__________, and net interest income to __________.

• A) increase, increase, increase
• B) increase, decrease, increase
• C) increase, increase, decrease
• D) decrease, decrease, decrease
• E) decrease, increase, increase

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Definitions:

Retained Earnings

The cumulative amount of earnings or profit of a firm after dividend payments, which is reinvested in its business.

Full-Capacity Sales

The maximum level of sales that a company can achieve using its current operational capabilities, without incurring additional capital expenses.

Current Level

Refers to the present status or value of a particular metric or variable at the moment of analysis.