Question: Is there interest rate risk? Use duration gap 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 5-year maturity that pays 5% annual interest compounded daily. All interest and principal are paid at the end of 5 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% annual interest but is fully amortized with 60 monthly payments, such that the borrower pays the same dollar amount (principal plus interest) each month.