Consider an Asset with a Current Market Value of $250

Multiple Choice

Consider an asset with a current market value of $250 000 and a duration of 3.3 years. Assume the asset is partially funded through zero-coupon bonds which currently sells for $225 000 and has a maturity of 4 years. The current discount rate is 15 per cent. Calculate the duration gap for this scenario:

A) -0.3 years
B) 0.3 years
C) -0.7 years
D) 0.7 years