A bank that expects interest rates to increase in the future will wants to hold more rate sensitive asset and fewer rate sensitive liabilities. (Choose the correct option)
A bank that expects interest rates to increase in the future will wants to hold more rate sensitive asset and fewer rate sensitive liabilities. (Choose the correct option)
1. Disagree. Rate sensitivve assets will increase the revenue this holding more of them as assets while reducing them as liabilities will decrease bank profits
2. Disagree. In any case it is more profitable for banks to reduce the number of rate sensitive assets and liabilities and increase assets and liabilities with fixed interest
3. Agree. Rate sensitive assets will increase the revenue thus holding more of them as assets while reducing them as liabilities will increase bank profits
4. Agree. Rate sensitive assets will increase in value thus holding more of them as assets, while reducing them as liabilities will decrease interest rate risk
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