Question
Suppose that a savings institution has an average asset duration of 4.5 years and an average liability duration of 5.0 years. If the savings institution
Suppose that a savings institution has an average asset duration of 4.5 years and an average liability duration of 5.0 years. If the savings institution holds total assets of BD 630 million and total liabilities of BD 537 million.
Answer the following questions.
- does it have a significant leverage-adjusted duration gap?
- If interest rates falls, what will happen to the value of its net worth?
Step by Step Solution
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Step: 1
To determine if the savings institution has a significant leverageadjusted duration gap we need to c...
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Bank Management and Financial Services
Authors: Peter Rose, Sylvia Hudgins
9th edition
78034671, 978-0078034671
