A Bank Has $100 Million of Investment Grade Bonds with a Duration

question 83

Multiple Choice

A bank has $100 million of investment grade bonds with a duration of 9.0 years.This bank also has $500 million of commercial loans with a duration of 5.0 years.This bank has $300 million of consumer loans with a duration of 2.0 years.This bank has deposits of $600 million with a duration of 1.0 year and non-deposit borrowings of $100 million with an average duration of .25 years.What is this bank's duration gap? These are all of the assets and liabilities this bank has.

• A)This bank has a duration gap of 14.75 years.
• B)This bank has a duration gap of 15.03 years.
• C)This bank has a duration gap of 3.55 years.
• D)This bank has a duration gap of 3.75 years.
• E)This bank has a duration gap of 5.15 years.

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Definitions:

Opponent-process Theory

A psychological and neurological model that describes how the perception of one emotional state can directly generate the opposite emotional response over time.

Thrill Seeking

The pursuit of activities that produce a rush of adrenaline, often involving risk or danger.

Drug Abuse

The habitual taking of addictive or illegal drugs, leading to severe personal and social consequences.

Attachment

An emotional bond to another person, typically forming between a child and caregiver, that is crucial for the child's personal development.