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 abovE.

Question

Quizplus · Accepted Answer

The average maturity of the liabilities of an FI's balance sheet is determined by taking the weighted-average of the liabilities where the weights are determined relative to the total liabilities of the FI. The maturity mismatch between assets and liabilities can have significant implications for an FI's risk management and profitability. By calculating the average maturity of liabilities, an FI can assess its exposure to changes in interest rates and liquidity risks.

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