1.Consider the following balance sheet (in millions) for an FI:

What is the FI’s duration gap?
What is the FI’s interest rate risk exposure?
How can the FI use futures and forward contracts to put on a macrohedge?
What is the impact on the FI’s equity value if the relative change in interest rates is an increase of 1 per cent? That is, ΔR /(1 + R ) = 0.01.
Suppose that the FI in part

(c) macrohedges using T-bond futures that are currently priced at 96. What is the impact on the FI’s futures position if the relative change in all interest rates is an increase of 1 per cent? That is, ΔR /(1 + R ) = 0.01. Assume that the deliverable T-bond has a duration of nine years.
If the FI wants to macrohedge, how many T-bond futures contracts does it need? LO 7.2, 7.3

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Liabilities Assets Duration 10 years $950 Duration 2 years $860