22-107 What is the leveraged-adjusted duration gap of the bank's portfolio?
A)10 years.
B)7.3 years.
C)7 years.
D)7.18 years.
E)3 years.

Question

Quizplus · Accepted Answer

The formula for leveraged-adjusted duration gap is as follows:
Leveraged-Adjusted Duration Gap = (Economic Value of Equity / Total Assets) x Duration Gap
= ($10,000,000 / $100,000,000) x 0.72
= 0.1 x 7.2
= 0.72
Therefore, the leveraged-adjusted duration gap of the bank's portfolio is 7.18 years, which is closest to answer choice D.

22-107 What Is the Leveraged-Adjusted Duration Gap of the Bank's