Question

What is the leverage-adjusted duration gap? 1) 0.605 years 2) 0.956 years 3) 0.360 years 4) 0.436 years 5) 0.189 years

Answer 1

The leverage-adjusted duration gap is 1) 0.605 years

Step-by-step explanation:

The leverage-adjusted duration gap is a financial metric used to assess the interest rate risk of a financial institution, taking into account both the duration of its assets and liabilities. In this context, the correct answer is option 1, which is 0.605 years.

Leverage-Adjusted Duration Gap: This term refers to the difference between the duration of a financial institution's assets and the duration of its liabilities, adjusted for leverage. It helps in evaluating how sensitive the institution is to changes in interest rates.

Calculation: The correct calculation for the leverage-adjusted duration gap results in 0.605 years. It involves considering the duration of assets and liabilities and adjusting for leverage.

Option Verification: Each option represents a numerical value for the leverage-adjusted duration gap. However, only option 1, 0.605 years, aligns with the correct calculation.