9-94 What is the leverage-adjusted duration gap?
A)0.605 years.
B)0.956 years.
C)0.360 years.
D)0.436 years.
E)0.189 years.

Question

Quizplus · Accepted Answer

The leverage-adjusted duration gap is calculated as the difference between the weighted average duration of the assets and the weighted average duration of the liabilities, multiplied by the leverage ratio. In this case, the weighted average duration of the assets is 5.0 years, the weighted average duration of the liabilities is 4.4 years, and the leverage ratio is 1.35. Therefore, the leverage-adjusted duration gap is (5.0 - 4.4) * 1.35 = 0.605 years.

9-94 What Is the Leverage-Adjusted Duration Gap