A bank with a negative interest-sensitive GAP:
A)has a greater dollar volume of interest-sensitive liabilities than interest-sensitive assets.
B)will generate a higher interest margin if interest rates rise.
C)will generate a lower interest margin if interest rates fall.
D)has assets and liabilities with the same duration.
E)has liabilities with a greater duration than its assets.

Question

Quizplus · Accepted Answer

A bank with a negative interest-sensitive GAP has a greater dollar volume of interest-sensitive liabilities than interest-sensitive assets. This means that the bank is more exposed to a decrease in interest rates than an increase, and therefore, will generate a lower interest margin if interest rates fall.

A Bank with a Negative Interest-Sensitive GAP