Assume a Bank Has $200 Million of Assets with a Duration

question 116

Multiple Choice

Assume a bank has $200 million of assets with a duration of 2.5,and $190 million of liabilities with a duration of 1.05. The duration gap for this bank is

• A)0.5 year.
• B)1 year.
• C)1.5 years.
• D)2 years.

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Definitions:

Unobservable Characteristics

Traits or factors not immediately apparent or measurable that can influence outcomes or decisions.

Unobservable Actions

Actions taken by individuals or entities that cannot be directly observed or monitored, often leading to issues of information asymmetry.

Moral Hazard

A situation in insurance and economics where one party is more likely to take risks because they do not bear the full consequences of their actions, often due to asymmetric information.

Transaction

An exchange or transfer of goods, services, or funds between two or more parties.