If interest rates fall when a bank is in an asset-sensitive position,its net interest margin will rise.

Question

Quizplus · Accepted Answer

When a bank is in an asset-sensitive position, it means that its assets (like loans) will reprice or adjust to changes in interest rates faster than its liabilities (like deposits). If interest rates fall, the interest income on its assets will decrease more quickly than the interest expense on its liabilities, leading to a decrease in the net interest margin, not an increase.

If Interest Rates Fall When a Bank Is in an Asset-Sensitive