Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Duration is a measure of price sensitivity to changes in interest rates, where the greater the duration of the asset (or liability), the more price

image text in transcribed

image text in transcribed

Duration is a measure of price sensitivity to changes in interest rates, where the greater the duration of the asset (or liability), the more price sensitive that asset (or liability) is. A positive Duration GAP (DGAP) suggests the duration of assets is greater than the duration of liabilities (DA>DL). Is the following statement True or False? When DGAP is positive, the economic value of equity (EVE) decreases as rates increase because the decrease in the value of the assets is proportionally more than the decrease in the value of the liabilities, causing the value of equity to fall. True False Duration is a measure of price sensitivity to changes in interest rates, where the greater the duration of the asset (or liability), the more price sensitive that asset (or liability) is. A positive Duration GAP (DGAP) suggests the duration of assets is greater than the duration of liabilities (DA>DL). Is the following statement True or False? When DGAP is positive, the economic value of equity (EVE) decreases as rates increase because the decrease in the value of the assets is proportionally more than the decrease in the value of the liabilities, causing the value of equity to fall. True False

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets And Institutions

Authors: Frederic S. Mishkin

2nd Edition

0321014650, 9780321014658

More Books

Students also viewed these Finance questions