An S&L Owns Mortgages That Have a Current Market Value

question 36

Multiple Choice

An S&L owns mortgages that have a current market value of $325 million. The duration of this portfolio of mortgages is 15.9 years. The S&L finances its mortgages by issuing CDs and the current value of these liabilities is $275 million. The duration of these liabilities is 4.6 years. What is the initial duration of the equity for the S&L?

• A) 103.25 years
• B) 78.05 years
• C) 25.30 years
• D) 53.00 years

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Definitions:

Terminate

To bring an operation or process to an end; in computing, it often refers to the stopping of a program or process.

Recursive Call

A method or function in computer programming that calls itself within its own definition to solve a problem by breaking it down into smaller, more manageable problems.

Base Case

In recursion, the condition under which a recursive function returns without calling itself, effectively stopping the recursion.

Original Method

The initial or primary implementation of a method before it is overridden or modified by additional functionality.