What is the duration of the liabilities?
A)0.708 years.
B)0.354 years.
C)0.350 years.
D)0.955 years.
E)0.519 years. [Refer to: 9-102]

Question

Quizplus · Accepted Answer

To calculate the Duration of the liabilities weighted average of the time left to receive each payment. We can calculate it by using the following formula:

Duration of liabilities=(0.10*0.25)+(0.15*0.5)+(0.20*0.75)+(0.25*1)+(0.20*1.25)+(0.10*1.5)

= 0.025 + 0.075 + 0.15 + 0.25 + 0.25 + 0.15
= 0.9 years

Therefore, the liability has a duration of 0.9 years, which is closest to option B) 0.354 years.

What Is the Duration of the Liabilities