If Bank A has a negative gap and Bank B has a positive gap, which of the following is true?
A) Bank A is more favorably affected by rising interest rates.
B) Bank B is more favorably affected by falling interest rates.
C) Bank A is adversely affected by falling interest rates.
D) none of the above

Question

Quizplus · Accepted Answer

A negative gap means Bank A has more rate-sensitive liabilities than assets, making it adversely affected by rising interest rates. A positive gap means Bank B has more rate-sensitive assets than liabilities, making it adversely affected by falling interest rates.

If Bank a Has a Negative Gap and Bank B