Allright Insurance Has Total Assets of $140 Million Consisting of $50

Multiple Choice

Allright Insurance has total assets of $140 million consisting of $50 million in 2-year,6 percent Treasury notes and $90 million in 10-year,7.2 percent fixed-rate Baa bonds.These assets are funded by $100 million 5-year,5 percent fixed rate GICs and equity.

The duration of the T-notes,Baa bonds,and GICs is 1.93 years,6.9 years,and 4.5 years respectively.What is the leverage-adjusted duration gap for Allright?

A) 1.99 years.
B) 5.13 years.
C) 0.63 years.
D) 1.91 years.