# Suppose that your bank buys a T-bill yielding 4% that matures in six months and finances the purchase with a three-month time deposit paying 3%. The purchase price of the T-bill is \$3 million financed with a \$3 million deposit. What is the six-month and three-month GAP associated with this transaction? Which is a better GAP measure of the bank’s risk?

Six months GAP

Attention perceptive Asset = \$ 3 mn T – bills maturing in 6 months

Attention perceptive jurisdiction = \$ 3mn age deposits rolled aggravate succeeding 3 months control direct three months

Hence, six months GAP = Attention perceptive asset – attention perceptive jurisdiction = \$ 3mn – \$ 3 mn = 0

Three months GAP

Attention perceptive Asset = 0 (this is owing T – bills are maturing in 6 months)

Attention perceptive jurisdiction = \$ 3mn age deposits

Hence, six months GAP = Attention perceptive asset – attention perceptive jurisdiction = 0 – \$ 3 mn = – \$ 3 mn

Reform mete

The bank is really having asset jurisdiction manliness antagonist. It has an asset that succeed confirmed in 6 months age eraliness jurisdiction succeed confirmed in three months age. Six months GAP fall to stop this as it shows a GAP of 0, eraliness three months GAP stops this adequately which shows a GAP of – \$ 3mn. Hence, three months GAP is a reform mete of bank’s surrender.