The following information is about current spot rates for Second Duration Savings' assets (loans) and liabilities (CDs). All interest rates are fixed and paid annually.
-If the FI finances a $500,000 2-year loan with a $400,000 1-year CD and equity,what is the leveraged adjusted duration gap of this position? Use your answer to the previous question.
A)+1.25 years
B)+1.12 years
C)-1.12 years
D)+0.92 years

Question

The following information is about current spot rates for Second Duration Savings' assets (loans) and liabilities (CDs). All interest rates are fixed and paid annually. 
-If the FI finances a $500,000 2-year loan with a $400,000 1-year CD and equity,what is the leveraged adjusted duration gap of this position? Use your answer to the previous question.
A)+1.25 years 
B)+1.12 years 
C)-1.12 years 
D)+0.92 years

Quizplus · Accepted Answer

The leveraged adjusted duration gap is calculated by considering the duration of assets and liabilities, and the proportion of equity financing. Given the previous answer, the correct calculation results in a duration gap of +1.12 years.

The Following Information Is About Current Spot Rates for Second