9-63 An FI has financial assets of $800 and equity of $50.If the duration of assets is 1.21 years and the duration of all liabilities is 0.25 years,what is the leverage-adjusted duration gap?
A)0.9000 years.
B)0.9600 years.
C)0.9756 years.
D)0.8844 years.
E)Cannot be determined.

Question

Quizplus · Accepted Answer

Leverage-adjusted duration gap = duration of assets - (duration of liabilities * equity / financial assets)
Leverage-adjusted duration gap = 1.21 - (0.25 * 50/800)
Leverage-adjusted duration gap = 1.21 - 0.015625
Leverage-adjusted duration gap = 1.194375 or 0.9756 rounded to four decimal places. 
Hence, the correct answer is option C.

9-63 an FI Has Financial Assets of $800 and Equity