The average maturity of the liabilities of an FI's balance sheet is equal to
A)the weighted-average of the liabilities where the weights are determined relative to the total liabilities and equity of the FI.
B)the weighted-average of the liabilities where the weights are determined relative to the total liabilities of the FI.
C)the weighted-average of the liabilities where the weights are determined relative to the total assets of the FI.
D)the weighted-average of the liabilities where the weights are determined using market values of liabilities.
E)None of the options.
The balance sheet of XYZ Bank appears below.All figures in millions of U.S.dollars.
\(
~Assets~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Liabilities\
\begin{array}{|l|r|r|l|l|r|}
\hline 1 & \begin{array}{l}
\text { Short-term consumer } \
\text { loans (one-year maturity) }
\end{array} & \$ 150 & 1 & \text { Equity capital (fixed) } & \$ 120 \
\hline 2 & \begin{array}{l}
\text { Long-term consumer } \
\text { loans }
\end{array} & 125 & 2 & \begin{array}{l}
\text { Demand deposits } \
\text { (two-year maturity) }
\end{array} & 40 \
\hline 3 & \begin{array}{l}
\text { Three-month Treasury } \
\text { bills }
\end{array} & 130 & 3 & \text { Passbook savings } & 130 \
\hline 4 & \text { Six-month Treasury notes } & 135 & 4 & \text { Three-month CDs } & 140 \
\hline 5 & \text { Three-year Treasury bond } & 170 & 5 & \begin{array}{l}
\text { Three-month bankers } \
\text { acceptances }
\end{array} & 120 \
\hline 6 & \begin{array}{l}
10 \text {-year, fixed-rate } \
\text { mortgages }
\end{array} & 120 & 6 & \begin{array}{l}
\text { Six-month } \
\text { commercial paper }
\end{array} & 160 \
\hline 7 & \begin{array}{l}
30 \text {-year, floating-rate } \
\text { mortgages (rate adjusted } \
\text { every nine months) }
\end{array} & 140 & 7 & \begin{array}{l}
\text { One-year time } \
\text { deposits }
\end{array} & 120 \
\hline & && 8 & \begin{array}{l}
\text { Two-year time } \
\text { deposits }
\end{array} & 40 \
\hline
&&\$970&&&\$970\
\hline
\end{array}\)
[Reference: 8-84]

Question

Quizplus · Accepted Answer

The average maturity of the liabilities of a financial institution (FI) is calculated as the weighted-average of the liabilities, where the weights are determined relative to the total liabilities of the FI, excluding equity.

The Average Maturity of the Liabilities of an FI's Balance