Domino is a medium-sized bank and its assets are mainly variable rate loans falling in different maturity buckets. The bank does not have any rate-sensitive liabilities. Which of the following statements is TRUE with respect to the interest rate risk of the bank?

Question 1Select one:

A.

The effect of interest rate changes on net interest income will depend on the difference in the durations of the bank's assets and liabilities.

B.

If the interest rate decreases, the bank will always incur a decrease in net interest income

C.

If the interest rate increases, the bank's net interest income may increase or decrease depending on how the interest rate increases affect the different maturity buckets of loans.

D.

If the interest rate increases, the bank will always incur a decrease in net interest income.

E.

If the interest rate decreases, the bank's net interest income may increase or decrease depending on how the interest rate decreases affect the different maturity buckets of loans.