When interest-sensitive assets are financed by interest-sensitive liabilities,changes in interest rates will affect:
A) only interest-sensitive assets.
B) only interest-sensitive liabilities.
C) both interest-sensitive assets and interest-sensitive liabilities.
D) only long-term assets.

Question

Quizplus · Accepted Answer

Interest-sensitive assets and liabilities both have their interest rates tied to market interest rates. Therefore, changes in interest rates will affect both the assets and liabilities in the same way. This is particularly relevant when interest-sensitive assets (such as loans or mortgages) are financed by interest-sensitive liabilities (such as deposits or borrowings).

When Interest-Sensitive Assets Are Financed by Interest-Sensitive Liabilities,changes in Interest