Consider a bank that has made large number of loans at a fixed interest rate of 4% and pays 3% interest to depositors. Assume that interest rates go up. New loans are now being made at 6% throughout the ecomony and depositors are paid 5% interest. How does this change affect the bank’s financial position.

Answer rating: 100% (QA)

As both rates are increasing in the same proportion deposit rate and ... View the full answer