Question
If a bank manager is quite certain that interest rates are going to increase next month, how should the bank manager adjust the banks one-month
If a bank manager is quite certain that interest rates are going to increase next month, how should the bank manager adjust the banks one-month repricing gap to increase the net interest income when interest rates increase ?
The bank should set its repricing gap to a negative position. In this case, as rates increase, market value of assets will increase by more than the increase in market value of liabilities.
The bank should set its repricing gap to a negative position. In this case, as rates increase, interest expense will increase by less the increase than interest income.
The bank should set its repricing gap to a positive position. In this case, as rates increase, interest income will increase by more than the increase in interest expense.
The bank should set its repricing gap to a positive position. In this case, as rates increase, market value of assets will increase by more than the increase in market value of liabilities.
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