If a bank has more interest rate-sensitive liabilities than interest rate-sensitive assets, then it has a:
A) positive dollar gap
B) negative dollar gap
C) positive duration gap
D) negative duration gap

Question

Quizplus · Accepted Answer

A negative dollar gap occurs when a bank has more interest rate-sensitive liabilities than interest rate-sensitive assets, meaning it could lose money if interest rates rise because its costs (liabilities) would increase more than its earnings (assets).

If a Bank Has More Interest Rate-Sensitive Liabilities Than Interest