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Problem:
Assets
Par
Amount
Rate
Liabilities
2-year commercial loans, annual fixed rate, at par
$400 million
10 %
1-year CDs, annual fixed rate, at par
$450 million
7 %
1-Year Treasury bills
$100 million
Net Worth
$50 million
1. What is the duration of the commercial loans?
a. 1.00 years.
b. 2.00 years.
c. 1.73 years.
d. 1.91 years.
e. 1.50 years.
2. 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.
Summary of problem:
These short questions is from Finance as well as the questions are about computation of the duration of a commercial loan as well as leverage adjusted duration gap for bank with the given data.
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