To Get D_E to Equal Zero to Protect the Equity

question 32

Multiple Choice

To get D_E to equal zero to protect the equity value in the event of an interest rate change, the bank could

• A) reduce D_A to 1.21 years.
• B) increase D_L to 2.44 years.
• C) increase D_L to 3.10 years.
• D) reduce D_A to zero.
• E) increase D_L to 2.66 years. 2.5 x 850/768

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Definitions:

Extreme Scores

Values in a set of data that are significantly higher or lower than the majority of the other data points.

Individual Earnings

The amount of money earned by an individual from work or investments.

Mean

The arithmetic average of a set of values, calculated by adding all the numbers and dividing by the count of values.

Central Tendency

A statistical measure that identifies a single value as representative of an entire dataset, commonly reflected through the mean, median, or mode.