First Duration, a Securities Dealer, Has a Leverage-Adjusted Duration Gap

question 49

Multiple Choice

First Duration, a securities dealer, has a leverage-adjusted duration gap of 1.21 years, $60 million in assets, 7 percent equity to assets ratio, and market rates are 8 percent.
-What is the impact on the dealer's market value of equity per $100 of assets if the change in all interest rates is an increase of 0.5 percent [i.e., ΔR = 0.5 percent]

• A)+$336,111.
• B)-$0.605.
• C)-$336,111.
• D)+$0.605.
• E)-$363,000.

Recognize the tax implications for lessors and lessees, including Capital Cost Allowance (CCA) recapture and terminal losses.

Understand the factors that determine the lease versus buy decision, including the impact of lease payments on taxes.

Identify different types of leases (synthetic, leveraged, sale and leaseback) and their characteristics.

Understand the impact of leasing on financial ratios and the balance sheet.

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Definitions:

Interaction

A pattern of results in which the effect of one independent variable on the dependent variable depends on the level of a second independent variable.

Stereotype

A widely held but fixed and oversimplified image or idea of a particular type of person or thing.

Embezzlement Charges

Legal accusations against a person who has unlawfully taken money or property they were trusted to manage or hold.

Neuroticism

A personality trait characterized by the tendency to experience negative emotions such as anxiety, anger, or depression more frequently and intensely than average.