7 The following balance sheet information is available amounts in thousands of dollars and duration in years) for a financial institution: AssetsLiabilities and Equity in millions T-bills $ 95.00 0.5 T-notes $ 125.00 0.9 T-bonds $ 100.00 Loans $2,724.00 Deposits $2,092.00 1 Federal funds $ 282.00 0.01 Equity $ 670.00 Treasury bonds are five-year maturities paying 6 percent semiannually and quoted at 0.92 a. What will be the bonds' new prices if market yields change immediately by : 0.10 percent? What will be the new prices if market yields change immediately by + 2.00 percent? b. What are the predicted bond prices in each of the four cases using the duration rule? What is the amount of error between the duration prediction and the actual market values? c. Given that convexity is 212.4, what are the bond price predictions in each of the four cases using the duration plus convexity relationship? What is the amount of error in these predictions? d. Why there is difference in estimations between Duration and Convexity? Discuss the both methods. 7 The following balance sheet information is available amounts in thousands of dollars and duration in years) for a financial institution: AssetsLiabilities and Equity in millions T-bills $ 95.00 0.5 T-notes $ 125.00 0.9 T-bonds $ 100.00 Loans $2,724.00 Deposits $2,092.00 1 Federal funds $ 282.00 0.01 Equity $ 670.00 Treasury bonds are five-year maturities paying 6 percent semiannually and quoted at 0.92 a. What will be the bonds' new prices if market yields change immediately by : 0.10 percent? What will be the new prices if market yields change immediately by + 2.00 percent? b. What are the predicted bond prices in each of the four cases using the duration rule? What is the amount of error between the duration prediction and the actual market values? c. Given that convexity is 212.4, what are the bond price predictions in each of the four cases using the duration plus convexity relationship? What is the amount of error in these predictions? d. Why there is difference in estimations between Duration and Convexity? Discuss the both methods