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Exam 2016-FRR Topic 1 Question 135 Discussion

Actual exam question for GARP's 2016-FRR exam
Question #: 135
Topic #: 1
Suppose Delta Bank enters into a number of long-term commercial and retail loans at fixed rate prevailing at the time the loans are originated. If the interest rates rise:

Suggested Answer: A Vote an answer

When a bank enters into long-term fixed-rate loans and interest rates rise, the bank faces higher costs for its deposits and debt if these are linked to floating rates or have shorter maturities. This creates a mismatch between the fixed income from the loans and the increased cost of funds, potentially squeezing the bank's margins.

by Leonard at Oct 04, 2024, 10:19 AM

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