Given the following information:
Interest sensitive assets = $300 30-day commercial paper
Interest sensitive liabilities = $400 90-day CDs
30-day commercial paper is 50 percent as volatile as 90-day T-bills
90-day CDs are 120 percent as volatile as 90-day T-bills
Calculate the standardized gap for the bank.
A) $160
B) $563
C) -$100
D) -$330

Question

Quizplus · Accepted Answer

The standardized gap is calculated by adjusting the interest-sensitive assets and liabilities for their volatility relative to a common benchmark, in this case, the 90-day T-bills. The adjusted assets are $300 * 0.5 = $150, and the adjusted liabilities are $400 * 1.2 = $480. The standardized gap is $150 - $480 = -$330.

Given the Following Information