Which of the Following Is an Advantage of Static GAP

question 20

Multiple Choice

Which of the following is an advantage of static GAP analysis?

• A) Static GAP analysis considers the time value of money.
• B) Static GAP analysis indicates the specific balance sheet items that are responsible for the interest rate risk.
• C) Static GAP analysis considers the cumulative impact of interest rate changes on the bank's position.
• D) Static GAP analysis considers the embedded options in loans, such as mortgage pre-payments.
• E) All of the above are advantages of static GAP analysis.

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Definitions:

Present Value

The current price of a future sum of money or stream of cash flows, discounted at a certain rate of return.

Cash Flow

The complete inflow and outflow of cash and equivalent financial assets within a business framework.

Future Value Formula

A mathematical equation used to calculate the future value of an investment based on its current value, the interest rate, and the time period of the investment.

Compounded Monthly

The process where interest earned on an investment is added to the principal each month, with future interest then earned on the new total.