Duration of Commercial Loans -What Is the FI's Leverage-Adjusted Duration Gap?
A)0

Duration of commercial loans $$D = \frac { \sum _ { t = 1 } ^ { N } P V _ { t } \times t } { \sum _ { t = 1 } ^ { N } P _ { t } } = \frac { \left[ \frac { 40,000,000 } { ( 1.10 ) ^ { 1 } } \times 1 \right] + \left[ \frac { 40,000,000 + 400,000,000 } { ( 1.10 ) ^ { 2 } } \times 2 \right] } { 400,000,000 } = 1.9114$$
-What is the FI's leverage-adjusted duration gap?

A) 0.91 years.
B) 0.83 years.
C) 0.73 years.
D) 0.50 years.
E) 0 years.

Correct Answer:

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