Computation of the duration of a commercial loan

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Reference no: EM13827737

Problem:

Assets

Par

Amount

Rate

Liabilities

Par

Amount

Rate

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.

Reference no: EM13827737

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