Final answer:
The leverage-adjusted duration gap measures a Financial Institution's exposure to interest rate risk. It is calculated by multiplying the duration gap by the leverage ratio. A round result of the leverage-adjusted duration gap is 2,085.57.
Step-by-step explanation:
The leverage-adjusted duration gap of an FI (Financial Institution) is a measure of the FI's exposure to interest rate risk. It is calculated by multiplying the FI's duration gap by its leverage ratio. Duration gap represents the difference between the duration of the FI's assets and liabilities, while the leverage ratio represents the proportion of borrowed funds used by the FI. The leverage-adjusted duration gap helps the FI understand how changes in interest rates will impact its financial position.
For example, let's say an FI has a duration gap of 3 years and a leverage ratio of 2. Its leverage-adjusted duration gap would be 6 years (3 years x 2). This means that a 1% change in interest rates would result in a 6% change in the value of the FI's equity.
In the given information, the leverage-adjusted duration gap is 2,085.57. If we round it to two decimal places, it would be 2,085.57.