Question
a. Calculate the leverage-adjusted duration gap of an FI that has assets of $2.3 million invested in 30-year, 9 percent semiannual coupon Treasury bonds selling
a. Calculate the leverage-adjusted duration gap of an FI that has assets of $2.3 million invested in 30-year, 9 percent semiannual coupon Treasury bonds selling at par and whose duration has been estimated at 10.07 years. It has liabilities of $1,030,000 financed through a two-year, 6.00 percent semiannual coupon note selling at par.
b. What is the impact on equity values if all interest rates fall 10 basis pointsthat is, R/(1 + R/2) = 0.0010?
Questions
a.) calculate the leveraged adjusted duration gap
b.) calculate the change in net worth using leveraged adjusted duration gap
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