-Calculate the Leverage-Adjusted Duration Gap to Four Decimal Places and |

question 69

Multiple Choice

$$\begin{array} { | l | r | c | c | } \hline \text { Assets } & \text { Amount } & \text { Rate } & \text { Duration } \\\hline \text { Cash } & \$ 75 \text { million } & & \\\hline \text { Loans } & \$ 750 \text { million } & 12 \text { percent } & 1.75 \text { years } \\\hline \text { Treasuries } & \$ 175 \text { million } & 9 \text { percent } & 7.00 \text { years } \\\hline \text { Liabilities and Equity } & & & \\\hline \text { Time Deposits } & \$ 350 \text { million } & 7 \text { percent } & 1.75 \text { years } \\\hline \text { CDs } & \$ 575 \text { million } & 8 \text { percent } & 2.50 \text { years } \\\hline \text { Equity } & \$ 75 \text { million } & & \\\hline\end{array}$$
-Calculate the leverage-adjusted duration gap to four decimal places and state the FI's interest rate risk exposure of this institution.

• A)+1.0308 years; exposed to interest rate increases.
• B)-0.3232 years; exposed to interest rate increases.
• C)+0.8666 years; exposed to interest rate increases.
• D)+0.4875 years; exposed to interest rate increases.
• E)-1.3232 years; exposed to interest rate decreases.

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