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Calculate Leverage Adjusted Duration Gap And Duration Of Loan

Question

Assets

Par

Amount

Rate

Liabilities

Par

Amount

Rate

2-year commercial loans, annual fixed rate, at par

$400 million

10 %

1-year CDs, annual fixed rate, at par

$450 million

7 %

1-year Treasury bills

$100 million

 

Net Worth

$50 million

 


1. What is the duration of the commercial loans?
    a.    1.00 years.
    b.    2.00 years.
    c.    1.73 years.
    d.    1.91 years.
    e.    1.50 years.

2. What is the FI's leverage-adjusted duration gap?
    a.    0.91 years.
    b.    0.83 years.
    c.    0.73 years.
    d.    0.50 years.
    e.    0 years.

Summary

These short questions belong to Finance and the questions are about calculation of the duration of a commercial loan and leverage adjusted duration gap for the bank with the given data.

Total Word Count 75

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