Question

First National Bank

AssetsLiabilities
Rate-sensitive$40 million$50 million
Fixed-rate$60 million$50 million
If interest rates rise by 5 percentage points, say from 10 to 15%, bank profits (measured using gap analysis) will
A. decline by $0.5 million.
B. decline by $1.5 million.
C. decline by $2.5 million.
D. increase by $2.0 million.

Answer

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