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Question
The Harris State Bank has $2,000 in total assets (all of which are earning assets), $500 of which will be repriced in the next 90 days. This bank also has $1,600 in total liabilities, $1,000 of which will be repriced in 90 days. The bank currently earns 9 percent on its assets and pays 4 percent on its liabilities.
If interest rates on both assets and liabilities fall by 2 percent in the next 90 days, what should happen to this bank's net interest margin?
A. It should rise by 0.5 percent.
B. It should fall by 0.5 percent.
C. It should stay the same.
D. It should rise by 2 percent.
E. It should fall by 2 percent.
Answer
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