Consider an Asset with a Current Market Value of $250

question 35

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%.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

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Definitions:

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