8-62 The average maturity of the liabilities of an FI's balance sheet is equal to
A)the weighted-average of the liabilities where the weights are determined relative to the total liabilities and equity of the FI.
B)the weighted-average of the liabilities where the weights are determined relative to the total liabilities of the FI.
C)the weighted-average of the liabilities where the weights are determined relative to the total assets of the FI.
D)the weighted-average of the liabilities where the weights are determined using market values of liabilities.
E)None of the above.

Question

Quizplus · Accepted Answer

The average maturity of the liabilities of an FI's balance sheet is equal to the weighted-average of the liabilities where the weights are determined relative to the total liabilities of the FI. This is because the average maturity of liabilities is a measure of the timing of cash outflows from an FI, and the total liabilities of an FI represent all of its funding sources. Therefore, the weights should be based on the proportion of each liability's contribution to the overall funding of the institution. The other options are not the correct method for determining the average maturity of liabilities.

8-62 the Average Maturity of the Liabilities of an FI's