Question

In: Finance

Which of the following statements is not correct?


Which of the following statements is not correct? 

A Banks tend to have short-term liabilities and long-term assets. 

B Banks make money by charging higher interest rates on assets than they pay on their abilities 

C. Banks face problems when long-term interest rates are lower than short-term interest rates. 

D. Banks face problems when Interest rates decrease.

Solutions

Expert Solution

D is not correct. Banks do not necessarily face problems when interest rates decrease, as long as the interest margin can be maintained.

A is correct. Deposits are short term liabilities and loans are long term assets

B is correct. Banks make money on interest margin

C is correct. If interest rate earned on long-term loans are lower than interest rate paid on short-term deposits, banks will face problems

jeff jeffy answered 2 years ago
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