Calculation Of Leverage Adjusted Gap Between Assets and Liabilities And Loan Amortization

Question

1. An FI has financial assets of $800 and equity of $50. If the duration of assets is 1.21 years and the duration of all liabilities is 0.25 years, what is the leverage-adjusted duration gap?
    a.    0.9000 years.
    b.    0.9600 years.
    c.    0.9756 years.
    d.    0.8844 years.
    e.    Cannot be determined.

2. Calculate the duration of a two-year corporate loan paying 6 percent interest annually, selling at par. The $30,000,000 loan is 100 percent amortizing.
    a.    2 years.
    b.    1.89 years.
    c.    1.94 years.
    d.    1.49 years.
    e.    1.73 years.

3. Calculate the modified duration of a two-year corporate loan paying 6 percent interest annually. The $40,000,000 loan is 100 percent amortizing, and the current yield is 9 percent annually.
    a.    2 years.
    b.    1.91 years.
    c.    1.94 years.
    d.    1.49 years.
    e.    1.36 years.

Summary

These short questions belong to Finance. The 1st question is about leverage adjusted duration gap between assets and liabilities and 2nd and 3rd questions are about 100% loan amortization.

Total Word Count 99