rates rise, bor

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Select all that are true regarding interest rate risk for the bank.

A.Banksmakeprofitsfromhighratesondepositsandlowratesonloans.

B.The steeper the yield curve, the more profitable the bank becomes.

C.As long-term mortgage rates rise, borrowers are less likely to refinance or pay back their loans since they have locked in a lower rate, which results in slower than anticipated pay downs on the bank's MBS debt investment portfolio and a decrease in interest rate risk.

D.When the short-end of the yield curve rises and the long-end falls, the bank's profits will increase.

E.A bank's assets; money it lends out, and it's liabilities; money it uses to fund those assets, can mature or re-price at different times or at the

same time.

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