Use DGAP analysis to determine if there is interest rate risk in the following transaction: A bank obtains $ 25,000 in funds from a customer who makes a deposit with a five- year maturity that pays 5 percent annual interest compounded daily. All interest and principal are paid at the end of five years. Simultaneously, the bank makes a $ 25,000 loan to an individual to buy a car. The loan is at a fixed rate of 12 percent annual interest but is fully amortized with 60 monthly payments, such that the borrower pays the same dollar amount (principal plus interest) each month.

  • CreatedNovember 03, 2015
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