If a bank expects interest rates to consistently decrease over time, it will consider allocating most of its funds to rate-insensitive assets. Therefore, the option A holds true.
The interest rates offered by a bank can be referred to or considered as the rate at which it accepts deposits from the public. When the interests tend to decrease regularly, then the allocation of funds is done irrespective of the rate-sensitive assets, i.e., insensitive. This basic principle applies to all the commercial banks within an economy.
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Complete question
If a bank expects interest rates to consistently ____ over time, it will consider allocating most of its funds to rate-____ assets.
a. decrease; insensitive b. increase; insensitive c. increase; sensitive d. answers A and B are correct e. none of the above
