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ABC Financial Institution (FI) has assets of $500 million, which consists of $400 million 2- year commercial loans with a 10 percent annual fixed rate
ABC Financial Institution (FI) has assets of $500 million, which consists of $400 million 2- year commercial loans with a 10 percent annual fixed rate selling at par and $100 million 1- year zero coupon bonds. The assets are financed with equity and $450 million 1-year certificates of deposit (CDs) with a 7% annual fixed rate selling at par.
a. What is the leverage-adjusted duration gap of the FI?
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