A bank with a positive duration gap would experience an increase in the market value of equity with rising interest rates.

Question

Quizplus · Accepted Answer

A bank with a positive duration gap has assets that are more sensitive to interest rate changes than its liabilities. Therefore, if interest rates rise, the value of its assets would decrease more than the value of its liabilities, leading to a decrease in the market value of equity.

A Bank with a Positive Duration Gap Would Experience an Increase