Question

First Duration Bank has the following assets and liabilities on its balance sheet.

What is the duration of the commercial loans?

First Duration Bank has the following assets and liabilities on its balance sheet Rate Liabilities Par Amount $450 million 70 Par Amount 2-year commercial $400 million loans al fired rate at par 1-year Treasury bulls S100 million 10°. I ar CDs al feed raalpur Net Worth $50 million 7. What is the duration of the commercial loans? A 1.00 years B. 2.00 years. C. 1.73 years D. 1.91 years. E. 1.50 years 8. What is the Fi's leverage-adjusted duration gap? A. 0.91 years. B. 0.83 years. C. 0.73 years D. 0.50 years. E. O years 9. What is the Fl's interest rate risk exposure? A. Exposed to increasing rates B. Exposed to decreasing rates. C. Perfectly balanced D. Exposed to long-term rate changes E. Insufficient information,

Answer 1

Duration is given by the PV of the bond's cash flows, weighted by the period of its receipt and then finally dividing this by the current value. : Duration / 40 x1 + 440 x 2) you 36.364x1 + 727.273 400 2 1.91 years Henie option (D) is onrect. IJ