A bank has made a $10 million loan with no prepayment penalties at a rate of T-Bill (3-month) + 10%, reset every six months. It is funded by wholesale deposits procured at T-Bill (3-month) + 5%, reset every six months. What interest rate risk does the bank face?

Answer rating: 100% (QA)

The bank faces interest rate risk due to the mismatch between the loan and deposit rates which are b... View the full answer