Question

3. What is the weighted average duration of the assets

of the bank? Note: the duration of cash is zero. Assume there are
365 days in a year. Round your result to two decimal places
(5pts)

Answer 1

The weighted average duration of a bank's assets involves calculating the mean duration of all assets, considering their values and individual durations. The calculation here is not possible due to lack of specific data on the bank's assets.

Step-by-step explanation:

To calculate the weighted average duration of a bank's assets, we need to assess the individual durations for each asset class and then weigh them by their respective values on the bank's balance sheet. However, the student question does not provide the necessary data about the specific assets and their individual durations to calculate the weighted average duration. The question hints at the duration of cash being zero, which is an important consideration, as cash would not impact the average duration.

To proceed with the calculation, additional information such as the value and duration of each asset category (e.g., loans, securities, etc.) would be needed.

Note that the weighted average duration represents the sensitivity of the bank's assets to interest rate changes and is essential for managing interest rate risk.