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:

Control Group

In an experiment, a group of subjects that does not receive the experimental treatment and is used as a baseline to compare the effects of the treatment.

Lurking Variables

Variables that are not included as explanatory or dependent variables in a model but can affect the interpretation of the relationships being studied.

Fake Treatment

A placebo or sham treatment used in experimental research to test the efficacy of a real treatment.

Experiment

A scientific procedure undertaken to make a discovery, test a hypothesis, or demonstrate a known fact.