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The composition of the assets and liabilities of a financially strong NBFC are as follows: Duration...

The composition of the assets and liabilities of a financially strong NBFC are as follows: Duration of assets: 5.1 years, duration of liabilities: 2.1 years. What is its Leverage-adjusted duration? Select one:

since value of assets and liabilities are not given, can we assume something here for K

a. Equal to 3 years

b. Almost equal to 3.6 years

c. >3 years

d. <3 years

Solutions

Expert Solution

Leverage adjusted duration= Duration of Asset- Duration of liability*K

C)>3

K=L/A

L= Market Value of Liabilty

A= Market Value of Asset

Since value is not provided, MV of asset > MV of Liability

jeff jeffy answered 2 years ago
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