2 Use the following market value balance sheet information to answer the following questions Assets (in thousands) Amount Duration Liab NW Amount Duration Cash $100 0 00 1 yr CD $600 1 00 C I Loans $400 1 25 6 yr CD $300 5 00 Mortgage loans $500 7 00 NW $100 Total $1000 $1000 What is the institution's leverage adjusted duration gap Now the interest rate is 6 If next year the interest rate shifts upward 40 basis points, what is the impact on the FI's market value of equity c Suppose the bank wants to use 6 month T bill futures contracts to macrohedge its interest rate risk, T bill futures are currently priced at 97, and one Treasury bond futures contract has face value $100,000 Should the bank buy or sell the futures contracts How many T bill futures contracts would be needed

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2. Use the following market-value balance sheet information to answer the following questions. Assets (in thousands) Amount Duration Liab&NW Amount Duration__ Cash $100 0.00 1-yr

2. Use the following market-value balance sheet information to answer the following questions.

Assets (in thousands) Amount Duration Liab&NW Amount Duration__

Cash $100 0.00 1-yr CD $600 1.00

C&I Loans $400 1.25 6-yr CD $300 5.00

Mortgage loans $500 7.00 NW $100______________

Total $1000 $1000

What is the institution's leverage-adjusted duration gap?

Now the interest rate is 6%. If next year the interest rate shifts upward 40 basis points, what is the impact on the FI's market value of equity?

c. Suppose the bank wants to use 6-month T-bill futures contracts to macrohedge its interest-rate risk, T-bill futures are currently priced at 97, and one Treasury bond futures contract has face value $100,000. Should the bank buy or sell the futures contracts? How many T-bill futures contracts would be needed?