A bank's IS GAP is defined as:
A)the dollar amount of interest-sensitive assets divided by the dollar amount of interest-sensitive liabilities.
B)the dollar amount of earning assets divided by the dollar amount of total liabilities.
C)the dollar amount of interest-sensitive assets minus the dollar amount of interest-sensitive liabilities.
D)the dollar amount of interest-sensitive liabilities minus the dollar amount of interest-sensitive assets.
E)the dollar amount of earning assets times the average liability interest rate.

Question

Quizplus · Accepted Answer

IS GAP (Interest-Sensitive Gap) is the difference between the interest-sensitive assets and interest-sensitive liabilities. Therefore, the correct choice is C. A and B refer to different ratios, and E multiplies earning assets with the average interest rate of liabilities, which is not the definition of IS GAP.

A Bank's IS GAP Is Defined As