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. [Refer to: 9-92]

Question

Quizplus · Accepted Answer

The FI's leverage-adjusted duration gap is calculated as follows:
Duration gap = (Total assets x MVE duration) - (Total liabilities x MVL duration)
= (2000 x 6) - (1200 x 4) = 12,000 - 4,800 = 7,200
Leverage-adjusted duration gap = Duration gap / Total equity
= 7,200 / 8,700 = 0.83 years.

Therefore, the correct answer is B.

What Is the FI's Leverage-Adjusted Duration Gap