A Bank with a Leverage-Adjusted Duration Gap of 2 Years

question 3

Multiple Choice

A bank with a leverage-adjusted duration gap of 2 years and total assets of $100 million uses a futures contract whose underlying's duration is 5 years and has a price of $100,000 to hedge its exposure.The number of contracts needed is:

• A)2,000
• B)4,000
• C)8,000
• D)10,000
• E)20,000

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Definitions:

2,4-D

A synthetic auxin herbicide used to control broadleaf weeds, known for its role in agriculture and lawn care.

2,4,5-T

A herbicide that was one of the components of Agent Orange, used during the Vietnam War.

Auxin

A plant hormone involved in various aspects of growth and development, such as stem elongation, apical dominance, and root formation on cuttings (e.g., indole acetic acid [IAA]).

Nastic Movements

Non-directional responses to stimuli (e.g., temperature, humidity, light intensity) that cause movement in plants.