Question
AMR Finance, with assets of $50,000, has a leverage-adjusted duration gap (DGAP)of -2.50 years. Management wants to hedge the exposure to interest rate risk. The
AMR Finance, with assets of $50,000, has a leverage-adjusted duration gap (DGAP)of -2.50 years. Management wants to hedge the exposure to interest rate risk. The consensus forecast is that interest rates will decline by 50 basis points(0.50%) over the next year. What would be the impact on AMR Finance's net worth (
E) if interest rates do decrease by 50 basis points? Current interest rates are 3%.
A) - $5,000
B) + $5,000
C) - $606.80
D) + $606.80
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New Issues In Financial Institutions Management
Authors: F Fiordelisi, P Molyneux, D Previati
2010th Edition
0230278108, 978-0230278103
