Question

Suppose that management has misstated the rate sensitivity of the bank’s money market deposit accounts because the bank has not changed the rate it pays on these liabilities for six months and doesn’t plan to change them in the near future. Will the bank profit if rates rise over the next 90 days?

Answer 1

Answer:

Yes the bank will benefit from the increased interest rates.

Explanation:

The increase in the interest rate causes a bank to earn profits. The bank will make profit by the increased interest rates as they have initially set lower interest rate for the lending of fund. The rise in interest rate will cause increased interest payments to the bank causing the bank to raise its profits.