A Bank Has an Average Asset Duration of 5 Years

question 140

Multiple Choice

A bank has an average asset duration of 5 years and an average liability duration of 9 years.This bank has total assets of $1,000 million and total liabilities of $850 million.Currently,market interest rates are 5 percent.What will be this bank's leverage-adjusted duration gap?

• A)-4 years
• B)4 years
• C)2.65 years
• D)-2.65 years
• E)3.65 years

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Definitions:

Nonrandom Component

The portion of variability in data that is attributable to specific, deterministic causes, as opposed to random variation.

Simple Random Sample

A subset of individuals chosen from a larger set, where each member has an equal chance of being selected.

Associated Population

The group of all elements or individuals that share one or more characteristics, from which a sample may be drawn for a statistical study.

Statistic

A characteristic or measure obtained by using the data values from a sample.