Which of the Following Statements About Leverage Adjusted Duration Gap

question 56

Multiple Choice

Which of the following statements about leverage adjusted duration gap is true?

• A)It is equal to the duration of the assets minus the duration of the liabilities.
• B)The larger the gap in absolute terms, the more exposed the FI is to interest rate shocks.
• C)It reflects the degree of maturity mismatch in an FI's balance sheet.
• D)It indicates the dollar size of the potential net worth and its value is equal to duration divided by (1+R).

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Definitions:

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to evaluate if a stock is over or under-valued.

Earnings Per Share

The amount of earnings a company makes, divided by its outstanding common shares, which reveals the firm's level of profitability.

Return on Assets

A financial ratio indicating the profitability of a company relative to its total assets, measuring how effectively a company uses its assets to generate earnings.

Debt-Equity Ratio

The indicator that quantifies how much of a company's assets are financed through equity and how much through debt.