1. Assume that an FI has assets of $250 million and liabilities of $200 million. The duration of the assets is six years, and the duration of the liabilities is three years. The price of the futures contract is $115,000, and its duration is 5.5 years.

What number of futures contracts is needed to construct a perfect hedge if br  1.10?

If
Rf

/(1  Rf

)  0.0990, what is the expected
R /(1  R )?

22.

a.

b.

c.

d.

e.

f.

23.

a.

b.

c.

24.

25.

26.

a.

b.

Assets Liabilities Duration  10 years $950 Duration  2 years $860 Equity 90 Assets Liabilities Duration  10 years $950 Duration  2 years $860 Equity 90 sau05140_ch23_691-727.indd 723