Use the following table to answer the question :

-If interest rates rise by 5 percentage points,say,from 10 to 15%,bank profits (measured using gap analysis)will
A)decline by $0.5 million.
B)decline by $1.5 million.
C)decline by $2.5 million.
D)increase by $1.5 million.

Question

Use the following table to answer the question :

-If interest rates rise by 5 percentage points,say,from 10 to 15%,bank profits (measured using gap analysis)will
A)decline by $0.5 million. 
B)decline by $1.5 million. 
C)decline by $2.5 million. 
D)increase by $1.5 million.

Quizplus · Accepted Answer

Gap analysis measures the difference between rate-sensitive assets and liabilities. If interest rates rise, banks with more rate-sensitive liabilities than assets will see a decline in profits. The problem implies a specific decline of $1.5 million.

Use the Following Table to Answer the Question