1. An FI has a $200 million asset portfolio that has an average duration of 6.5 years. The average duration of its $160 million in liabilities is 4.5 years. Assets and liabilities are yielding 10 percent. The FI uses put options on T-bonds to hedge against unexpected interest rate increases. The average delta ( ) of the put options has been estimated at
0.3, and the average duration of the T-bonds is seven years. The current market value of the T-bonds is $96,000.