Solution:
The number of future contracts,
is calculated as follows:-
2454.55
~ 2455 contracts
5. Village Bank has $210 million worth of assets with a duration of 14 years and...
4.
Consider the following balance sheet (in millions) for an FI: Assets Duration = 10 years $ 910 Liabilities Duration = 4 years Equity $ 810 100 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the FI's equity...
Consider the following balance sheet (in millions) for an FI: Assets Duration = 13 years $ 970 Liabilities Duration = 5 years Equity $ 900 70 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the Fi's equity value...
This is another exam type question, covering numerouse subtopics. Consider the following balance sheet (in million) for a bank: Liabilities Assets Duration- 10 years $950 Duration-2 years $860 $90 Equity- The bank's leverage adjusted duration gap is about R) 0.01, equity would change by (calculate to two decimals). With this duration gap the bank should worry rising/falling) interest rates. In fact, if the relative change in interest rates is an increase of 1 per cent, that is AR/(1 million dollars...
This is another exam type question, covering numerouse subtopics. Consider the following balance sheet (in million) for a bank: Assets Duration :10years $950 Liabilities and equity Duration : 2 years $860 Equity : $90 The bank’s leverage adjusted duration gap is ____________ (calculate to two decimals). With this duration gap the bank should worry about __________(rising/falling) interest rates. In fact, if the relative change in interest rates is an increase of 1 per cent, that is ΔR/(1 + R) =...
Morning View National Bank reports that its assets have a duration of 7 years and its liabilities average 1.75 years in duration. To hedge this duration gap, management plans to employ Treasury bond futures, which are currently quoted at 112-170 and have a duration of 10.36 years. Morning View’s latest financial report shows total assets of $100 million and liabilities of $88 million. Approximately how many futures contracts will the bank need to cover its overall exposure?
Row Bank has assets of $150 million, liabilities of $135 million, and equity of $15 million. The duration the assets is two years and the duration of the liabilities is ten years. Row Banks has a __adjusted duration gap. A position in T-bond futures should be used to hedge the interest rate risk Select one: O a. negative; short b. negative; long c. positive; short d. positive; long
3.
Hedge Row Bank has the following balance sheet (in millions): $ 189 $210 Liabilities Assets Equity 21 $ 210 $210 Total Total The duration of the assets is 7 years and the duration of the liabilities is 5 years. The bank is expecting interest rates to fall from 10 percent to 9 percent over the next year. a. What is the duration gap for Hedge Row Bank? (Round your answer to 2 decimal places. (e.g., 32.16)) b. What is...
Lia bilities Duration 7 years $120 Duration 5 years $108 Average interest rate 6.00% $12 Al What is the bank's duration Ga 1 What is the bank's interest rate risk exposure? Why? (Hint: this is a qualitative question: exposure if interest rate increase or decrease? Justify your answer C) How can the bank use futures ajd forward contracts to put on a macro-hedge Hint: this is a qualitative question) what is the impact on the bank's equity if the interest...
Lia bilities Duration 7 years $120 Duration 5 years $108 Average interest rate 6.00% $12 Al What is the bank's duration Ga 1 What is the bank's interest rate risk exposure? Why? (Hint: this is a qualitative question: exposure if interest rate increase or decrease? Justify your answer C) How can the bank use futures ajd forward contracts to put on a macro-hedge Hint: this is a qualitative question) what is the impact on the bank's equity if the interest...
your bond portfolio has a value of $10,600,000 with a duration of 2.2 years. how many 90-day treasuryy bill futures contracts do you need to hedge this exposure if the futures contract is priced at $995,000?! assume you are carrying out duration-based hedging.