Use the following bank information for questions .
$\begin{array}{|l|l|l|l|l|l|l|l|}
\hline &\begin{array}{c}
\text { Market } \
\text { Value }
\end{array} &\text { Rate } & \begin{array}{c}
\text { Duration } \
\text { (Years) }
\end{array} & \begin{array}{c}\text { Liabilities }\
\text { and } \
\text { Equity }
\end{array} & \begin{array}{c}
\text { Market } \
\text { Value }
\end{array} & \text { Rate } & \begin{array}{c}
\text { Duration } \
\text { (Years) }
\end{array} \
\hline\text { Cash } & \$ 150 & && \text {Time Deposits } & \$ 500 & 4 \% & 1.25 \
\hline \text { Loans } & \$ 675 & 10 \% & 2.50 &\text { CDs } & \$ 400 & 6 \% & 3.00 \
\hline\text { T-Bonds }&\$175&5\%&5.00&\text { Equity }&\$100&&\
\hline\text { Total }&\$1,000&&&&\$1,000\
\hline
\end{array}$
-What is the bank's duration gap?
A) 0.53
B) 0.73
C) 0.91
D) 2.03
E) 4.58

Question

Use the following bank information for questions .
 $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline &\begin{array}{c}
\text { Market } \
\text { Value }
\end{array} &\text { Rate } & \begin{array}{c}
\text { Duration } \
\text { (Years) }
\end{array} & \begin{array}{c}\text { Liabilities }\
\text { and } \
\text { Equity }
\end{array} & \begin{array}{c}
\text { Market } \
\text { Value }
\end{array} & \text { Rate } & \begin{array}{c}
\text { Duration } \
\text { (Years) }
\end{array} \
\hline\text { Cash } & \$  150 & && \text {Time Deposits } & \$  500 & 4 \% & 1.25 \
\hline \text { Loans } & \$  675 & 10 \% & 2.50 &\text { CDs } & \$  400 & 6 \% & 3.00 \
\hline\text { T-Bonds }&\$175&5\%&5.00&\text { Equity }&\$100&&\
\hline\text { Total }&\$1,000&&&&\$1,000\
\hline
\end{array}$
-What is the bank's duration gap?
A) 0.53
B) 0.73
C) 0.91
D) 2.03
E) 4.58

Quizplus · Accepted Answer

The duration gap is calculated as the weighted average duration of assets minus the weighted average duration of liabilities. For assets, the weighted durations are: - Cash: $150 * 0 = 0 - Loans: $675 * 2.50 = 1687.5 - T-Bonds: $175 * 5.00 = 875 Total weighted duration of assets = (0 + 1687.5 + 875) / $1000 = 2.5625 For liabilities: - Time Deposits: $500 * 1.25 = 625 - CDs: $400 * 3.00 = 1200 Total weighted duration of liabilities = (625 + 1200) / $1000 = 1.825 Duration gap = 2.5625 - 1.825 = 0.7375, which rounds to 0.73.

Use the Following Bank Information for Questions -What Is the Bank's Duration Gap? A) 0

Use the Following Bank Information for Questions -What Is the Bank's Duration Gap?
A) 0