Use the Following Information to Answer the Question(s)below

question 48

Multiple Choice

Use the following information to answer the question(s) below.
You are a risk manager for Security First Trust Savings and Loan (SFTSL) .SFTSL's balance sheet is as follows (in millions of dollars) : The duration of the auto loans is three years and the duration of the mortgages is eight years.Both cash reserves and checking and savings have zero duration.The CDs have a duration of two years and the long-term financing has a ten-year duration.
-Because of a new program called Kash for Klunkers,SFTSL experiences a rash of auto loan prepayments,reducing the size of the auto loan portfolio from $200 million to $100 million and increasing the cash reserves to $200 million.After these prepayments,the duration of SFTSL's equity is closest to:

• A)6 years.
• B)8 years.
• C)10 years.
• D)14 years.

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Definitions:

Accounts Payable

Liabilities or amounts owed by a business to suppliers or creditors for goods and services received but not yet paid for.

Independent Audit

An evaluation performed by an external entity to examine the accuracy and fairness of a company's financial statements.

Financial Ratio Analysis

A method of assessing a company's financial health and performance by using key figures from financial statements to calculate ratios for comparison and evaluation.

Income Statement Analysis

Examination of the income statement, a financial document outlining a company's revenue, expenses, and profits over a period, to assess financial performance and health.