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Question
A bank has $100 million of investment grade bonds with a duration of 9.0 years. This bank also has $500 million of commercial loans with a duration of 5.0 years. This bank has $300 million of consumer loans with a duration of 2.0 years. This bank has deposits of $600 million with a duration of 1.0 year and non-deposit borrowings of $100 million with an average duration of .25 years. What is this bank's duration gap? These are all of the assets and liabilities this bank has.
A. This bank has a duration gap of 14.75 years.
B. This bank has a duration gap of 15.03 years.
C. This bank has a duration gap of 3.55 years.
D. This bank has a duration gap of 3.75 years.
E. This bank has a duration gap of 5.15 years.
Answer
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