8-10 When a bank's repricing gap is positive,net interest income is positively related to changes in interest rates.

Question

Quizplus · Accepted Answer

A positive repricing gap means that a bank's assets (loans, investments) have a longer maturity or fixed rate than its liabilities (deposits, borrowings), so when interest rates increase, the bank's interest income on assets will increase more than its interest expense on liabilities. Therefore, net interest income will increase, making it positively related to changes in interest rates.

8-10 When a Bank's Repricing Gap Is Positive,net Interest Income