Which of the Following Statements About Leverage-Adjusted Duration Gap Is

question 99

Multiple Choice

Which of the following statements about leverage-adjusted duration gap is true?

• A)It is equal to the duration of the assets minus the duration of the liabilities.
• B)Larger the gap in absolute terms, the more exposed the FI is to interest rate shocks.
• C)It reflects the degree of maturity mismatch in an FI's balance sheet.
• D)It indicates the dollar size of the potential net worth.
• E)Its value is equal to duration divided by (1 + R).

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Definitions:

Current Year

The ongoing year or the present calendar year in which transactions or activities are being accounted for.

Preceding Year

The year immediately before the current year.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period, calculated as cost of goods sold divided by the average inventory.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit sales, calculated by dividing net credit sales by the average accounts receivable.