Question: Please explain the correct answer and why B is incorrect. To immunise the interest rate risk on the Balance Sheet, a FI could ideally': X

Please explain the correct answer and why B is incorrect. To

Please explain the correct answer and why B is incorrect.

To immunise the interest rate risk on the Balance Sheet, a FI could ideally': X X Select one: a. make the maturity of asset portfolio equal to the leverage adjusted maturity of liability portfolio. b. make the duration of asset portfolio equal to the duration of liability portfolio. c. make the duration of asset portfolio equal to the investment horizon. d. make the duration of asset portfolio equal to the leverage adjusted duration of liability portfolio. e. make the maturity of asset portfolio equal to the maturity of liability portfolio. The correct answer is: make the duration of asset portfolio equal to the leverage adjusted duration of liability portfolio

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