Consider an Asset with a Current Market Value of $250

question 40

Multiple Choice

Consider an asset with a current market value of $250 000 and a duration of 3.3 years. Assume the asset is partially funded through zero-coupon bonds which currently sells for $225 000 and has a maturity of 4 years. The current discount rate is 15 per cent. Which of the following statements is true?

• A) The FI is benefiting from increasing interest rates as it has a negative duration gap of 0.3 years.
• B) The FI is exposed to increasing interest rates as it has a negative duration gap of 0.3 years.
• C) The FI is exposed to increasing interest rates as it has a positive duration gap of 0.3 years.
• D) The FI is exposed to decreasing interest rates as it has a positive duration gap of 0.3 years.

---

Definitions:

University Program

An organized course of study or specialization offered at a university.

Random Order

A sequence of items, events, or numbers arranged without any predictable pattern or plan.

Men

Adult human males, often referred to in contexts discussing demographics, health, or social issues.

Random Order

A sequence or arrangement where items are shuffled in a way that each possible order has an equal chance of occurring.