A Bank Has a Negative Repricing Gap and Estimates That

question 3

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.
• E)None of the options are correct.

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Definitions:

Rectangle Area

The area of a rectangle is calculated by multiplying its length by its width.

Width

Width refers to the measurement or extent of something from side to side; in geometry, it is often used to describe the shorter side of a rectangle.

Division

A mathematical operation that is the inverse of multiplication; it involves splitting a quantity into equal parts.

Simplify

Reducing an expression or equation to its simplest form, often by combining like terms and applying arithmetic operations.