original answer not copy and paste please

A Depository Institution (bank) has $ 1 Billion in assets and 10% capital. It has funded itself through capital, checking accounts ($ 450 million) with an average duration of one (1) month and short-term Certificates of Deposit ($ 450 million) with an average duration of 3 months and an average maturity of 6 months.

What is the average duration of its liabilities?

Based on your answer to the asset portfolio duration question , what would you do if you saw massive inflation coming ? Or massive deflation coming?

Please briefly explain both of your answers by writing a few paragraphs for each answer.