-What Is the Duration of the Liabilities?
A)0

question 13

Multiple Choice

$$\begin{array} { | l | r | l | l | l | l | l | } \hline{ \text { Assets } } & \text { Amount } & & \text { Proportion } & & \text { Duration } & \text { Prop. } \times \text { Dur } \\\hline \text { 30-day T-bills } & 300 & 300 \div 1,730 & 0.1734 & 30 + 360 & 0.083 & 0.144442 \\\hline \text { 90-day T-bills } & 550 & 550 \div 1.730 & 0.3179 & 90 \div 360 & 0.250 & 0.079475 \\\hline \text { 2-year T-notes } & 700 & 700 \div 1,730 & 0.4046 & 720 \div 360 & 2.000 & 0.8092 \\\hline \text { 180-day munis } & 180 & 180 \div 1,730 & 0.1041 & 180 \div 360 & 0.500 & 0.05205 \\\hline \text { Total } & \$ 1,730 & \text { Weighted average duration of assets } & & &&\mathbf { 0 . 9 5 5 2 } \\\hline\end{array}$$
-What is the duration of the liabilities?

• A)0.708 years.
• B)0.354 years.
• C)0.350 years.
• D)0.955 years.
• E)0.519 years.

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Definitions:

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare among entities in the economy.

Rational Choice Theory

An economic theory that assumes individuals always make prudent and logical decisions that provide them with the highest amount of personal utility.

Public Interest

The well-being of the general public, often considered within the context of government policy-making.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare, including who ultimately pays the tax.