For a Bank with a Positive Duration Gap,an Increase in Interest

question 48

Multiple Choice

For a bank with a positive duration gap,an increase in interest rates will

• A)increase the likelihood of insolvency.
• B)decrease the likelihood of insolvency.
• C)not affect the likelihood of insolvency.
• D)result in increased loan trading.
• E)None of the options are correct.

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Definitions:

Job Prospects

The potential for future employment and career opportunities in a certain field or profession.

Human Capital

The abilities, learned knowledge, and lived experiences of a person or collective, regarded with respect to their financial value or expenditure to a business or state.

Physical Capital

Assets used by a business to produce goods and services, such as buildings, machinery, and equipment.

Diminishing Returns

A principle stating that as investment in a single area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.