A Bank Has an Average Duration for Its Asset Portfolio

question 29

Multiple Choice

A bank has an average duration for its asset portfolio of 5.5 years.The bank has total assets of $1,000 million and total liabilities of $750 million.If this bank's leverage-adjusted duration gap is zero,what must be the duration of its liabilities portfolio?

• A)7.33 years
• B)4.125 years
• C)7.5 years
• D)5.5 years
• E)None of the options is correct.

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Definitions:

Additive Colour Mixing

A process of mixing colored lights in which the wavelength of the combined colors is the sum of the individual lights, resulting in white when combining all primary colors.

Primary Colours

The set of colors which can be combined to create a broad spectrum of colors, traditionally red, yellow, and blue in pigment, or red, green, and blue in light.

White Light

A type of light that contains all wavelengths of visible light, perceived by humans as colorless or having the color of daylight.

Combine

To bring two or more elements together to form a whole or to unite different elements in a mixture or combination.