If a bank has a positive dollar GAP, an increase in interest rates will cause interest income to __________, interest expense to__________, and net interest income to __________. A. Decrease, decrease, decrease B. Increase, decrease, increase C. Increase, increase, increase D. Increase, increase, decrease E. Decrease, increase, increase
Positive gap means interest bearing assets is more than interest bearing liabilities. In this case when interest rate increases, income increases, expenses decrease and net interest income increases. Hence answer is option b
If a bank has a positive dollar GAP, an increase in interest rates will cause interest...
Risk Bank has a negative GAP position. If a parallel shift upward in interest rates occurs, the bank’s net interest income would be expected to: Question 23 options: Decrease by an amount equal to GAP Decrease by an amount equal to GAP times the change in rates Increase by an amount equal to GAP Increase by an amount equal to GAP times the change in rates
In a rising market interest rate environment, bank management's most likely action will be to: a. Decrease interest-sensitive assets. b. Increase interest-sensitive liabilities. c. Increase interest-sensitive assets. d. Have a higher negative relative IS gap. 2. A bank that is liability-sensitive will have: a. A positive impact on net interest income if interest rates fall. b. A negative impact on net interest income if interest rates rise. c. A positive impact on net interest income if interest rates rise. d....
31. Discuss the relationship between the Gap and the change in net interest income when interest rates decreased. Why did Net Interest Margin increase or decrease?
101) Since most banks have positive gaps and negative duration gaps, an increase in market interest rates will A) decrease bank profits and decrease bank capital. B) increase bank profits and increase bank capital. C) decrease bank profits and increase bank capital. D) increase bank profits and decrease bank capital.
A ___________income gap shows that the bank has __________ rate-sensitive assets and liabilities, and it will suffer from an increase in interest rate. Select one: a. negative; more b. positive; more c. negative; less d. positive; less
31. Discuss the relationship between the Gap and the change in net interest income when interest rates decreased. Why did Net Interest Margin increase or decrease?
If a bank has rate sensitive assets of $50 million and rate sensitive liabilities of $40 million, than an interest rate increase of 5 percentage points would cause net worth to(GAP Analysis) A. Increase $500 thousand B. Decrease by $500 thousand C Increase by $10 million D. All the previous answers are wrong Please Explain
Q6. A commercial bank has a very positive duration gap between assets and liabilities, and would like to invest in some mortgage-backed securities to hedge the interest rate risk. Please rank the following securities in terms of hedging benefit to the bank A. IO strip in a CMO B. PO strip in a CMO C. The most senior tranche (tranche A) in a CMO D. The residual tranche in a CMO E. The pass-through securities
(6 points) 3. The bank you own has the following balance sheet Liabilities with current interest rate Assets with current interest rate $5million $20 million Variable: 1% Checking Fixed: 0% Reserves deposits Savings Deposits $25 million Fixed: 2% $10 million Variable: 2% Government Securities Variable: 3 % $10 million Money Market Deposit Accounts $35 million Fixed: 6% Mortgage Loans Bank Capital To be To be $10 million Variable: 7% Short-Term determined determined Loans Business $20 million Fixed: 9% Loans $80...
37. If interest rates are projected for the next five years to be 5%,6%,7%,5% and 7% and the term premium on a 5 year bond is 1% then the interest rate on a 5 year bond is A. 6% B. 6.5% C.7% D. none of the previous CHAPTER 9: Banking & the management of financial institutions 38. A balance sheet indicates insolvency when A. Its capital exceeds its liabilities B. Its assets exceeds its liabilities C. Its liabilities exceeds its...