For every $100 in assets, a bank has $40 in interest-rate sensitive assets, and the other $60 in non-interest-rate sensitive assets. The same bank has $50 for every $100 in liabilities in interest-rate sensitive liabilities, the other $50 are in liabilities that are not interest-rate sensitive. If the interest rate on assets increases from 5 to 6 percent, and the interest rate on liabilities increases from 3 to 4 percent, the impact on the bank's profits per $100 of assets will be:
A. a decrease of $0.10.
B. a reduction of $1.00.
C. an increase of $0.10.
D. zero since the interest rates on assets and liabilities increased by the same amount.
Answer: A
Economics
You might also like to view...
The Phillips curve is a negative empirical relationship between
A) bond prices and interest rates. B) unemployment and output. C) inflation and the real interest rate. D) unemployment and inflation.
Economics
Refer to the information above. Which of the following represents the steady-state growth rate of output in this economy?
A) 2% B) 3% C) 5% D) 10% E) 15%
Economics