A Bank That Finances Long-Term Fixed-Rate Mortgages with Short-Term Deposits

Multiple Choice

A bank that finances long-term fixed-rate mortgages with short-term deposits is exposed to

A) increases in net interest income and decreases in the market value of equity when interest rates fall.
B) decreases in net interest income and decreases in the market value of equity when interest rates fall.
C) decreases in net interest income and increases in the market value of equity when interest rates increase.
D) increases in net interest income and increases in the market value of equity when interest rates increase.
E) decreases in net interest income and decreases in the market value of equity when interest rates increase.