Which of the following is true regarding duration gap analysis?
A)The magnitude of the duration gap is related to the amount of interest rate risk a bank is subject to.
B)Management can adjust the duration gap to speculate on future interest rate changes.
C)A positive duration gap means a bank's market value of equity will decrease with an increase in interest rates.
D)All of the above are true.
E)a.and c.

Question

Quizplus · Accepted Answer

Duration gap analysis assesses interest rate risk by comparing the durations of assets and liabilities. A positive duration gap indicates that the bank's equity value is sensitive to interest rate increases, and management can adjust the gap to manage risk or speculate on rate changes.

Which of the Following Is True Regarding Duration Gap Analysis