Which of the following statements is true?
A)The optimal duration gap is zero.
B)Duration gap measures the impact of unanticipated changes in interest rates on the market value of equity.
C)The shorter the maturity of the FI's securities, the greater the FI's interest rate risk exposure.
D)The duration of all floating rate debt instruments is equal to the time to maturity.

Question

Quizplus · Accepted Answer

Duration gap measures the sensitivity of the difference between the market value of a financial institution's assets and liabilities to changes in interest rates. A non-zero duration gap indicates that the values of assets and liabilities do not move equally with changes in interest rates, affecting the market value of equity.

Which of the Following Statements Is True