In: Accounting
Estimate the duration of Deposit N
Bank Balance Sheet |
|
Cash = $ 50 Loan M (7%, 6 years) = $200 |
Deposit N (3 years, 2%) = $ 200 Equity = $ 50 |
Total Assets = $250 |
Total Liabilities = $ 250 |
1.94 |
||
2.94 |
||
3.94 |
||
4.94 |
Answer:
Option B: 2.94
Calculations:
Years | Payment | PVAF | PV | Weight | Duration |
1 | $ 4.00 | 0.9804 | $ 3.92 | 0.0196 | $ 0.02 |
2 | $ 4.00 | 0.9612 | $ 3.84 | 0.0192 | $ 0.04 |
3 | $ 204.00 | 0.9423 | $ 192.23 | 0.9612 | $ 2.88 |
Total | $ 200.00 | 1.0000 | $ 2.94 |
Working Notes:
Hence, option 'B' is correct and rest all are incorrect.
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