What would happen to a bank's net interest income if it ran a zero gap in an environment of decreasing interest rates?
A) Net interest income would increase slightly.
B) Net interest income would increase considerably.
C) Net interest income would decrease.
D) Net interest income would hardly change at all.

Question

Quizplus · Accepted Answer

A zero gap means that the bank's interest rate-sensitive assets and liabilities are balanced, so changes in interest rates have minimal impact on net interest income.

What Would Happen to a Bank's Net Interest Income If