Calculation of Economic Value of Equity Net Worth = 1350.00 RSA =18251.00 RSL = 18590.00 Modifie

Calculation of Economic Value of Equity Net Worth = 1350.00 RSA =18251.00 RSL = 18590.00 Modified duration GAP DA = 1.96 DL = 1.25 01. What is Weight (W) ? a. 1 b. 1.02 c. 1.33 d. 1.66 Ans - b Solution: Calculate weight (W) = RSL/RSA =18590/18251 =1.018 =1.02 ............................................. 02. What is DGAP ? a. 0.33 b. 0.48 c. 0.69 d. 0.81 Ans - c Solution DGAP (modified duration gap) = DA - (W*DL) = 1.96 - (1.02*1.25) = 1.96 - 1.1275 = 0.685 = 0.69 ............................................. 03. What is Leverage Ratio? a. 12.33 b. 13.22 c. 13.52 d. 13.66 Ans - c Solution Leverage ratio= RSA/ Networth = 18251/1350 = 13.52 ............................................. 04. What is Modified Duration of Equity? a. 6.33 b. 7.33 c. 8.33 d. 9.33 Ans - d Solution: Modified duration of equity (MD) = DGAP * leverage ratio = 0.69 * 13.52 = 9.3288 = 9.33 years ............................................. 05. If there is 200 bp change in Rate what is drop in Equity Value? a. 18.66 b. 20.33 c. 22.66 d. 24.33 Ans - a Solution Equity value=Change in rate (BP)*MD =200*9.33/100 =18.6576 =18.66%