Assets: $200 Reserves; $5000 Short term Bonds; $6000 Long Term Loans Liabilities: $7000 Checkable Deposits; $3000 Fixed...

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Assets: $200 Reserves; $5000 Short term Bonds; $6000 Long Term Loans Liabilities: $7000 Checkable Deposits; $3000 Fixed...

Assets: $200 Reserves; $5000 Short term Bonds; $6000 Long Term Loans

Liabilities: $7000 Checkable Deposits; $3000 Fixed Rate Borrowings; $1200 Capital

What is the Gap for this bank and what does it measure? What (be specific) could the bank do to create a gap of zero?

business economics

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Answer 1

Answer #1

An Interest rate gap denotes interest rate risk. Now to measure the interest rate gap following formula is

Interest rate gap =Interest Bearing assets - interest-bearing liabilities.

In such a condition gap of zero can be achieved by the rate of interest immunization procedures.

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Answer 2

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