If a rise in interest rates causes a bank's market value of net worth to rise,the bank must have a:
A) positive duration gap for its portfolio of assets and liabilities.
B) negative duration gap for its portfolio of assets and liabilities.
C) negative gap.
D) positive gap.

Question

Quizplus · Accepted Answer

A positive duration gap means that the bank's assets have a longer duration than its liabilities. This means that the bank will benefit from a rise in interest rates, as the value of its assets will increase more than the value of its liabilities.

If a Rise in Interest Rates Causes a Bank's Market