Assets Liabilities Short Term Loans 1000 5-year CDs 1350 Long-Term Loans 500 Net Worth 150 The short-terms loans are zero coupon and repaid at the end of 1 year. The Long-term loans are zero coupon loans that mature in 3 years. On the liability side, the 5-year CDs are also zero coupon. Assume that the yield curve is flat and interest rates are 5% today. Suppose you want to duration hedge the banks equity by buying a 10-year Treasury STRIP financed with overnight borrowing in the interbank market. How would you hedge against a 1% increase in interest rates using STRIPS? a) Long 425 million b) Short 425 million c) Long 500 million d) Short 500 million e) Long 375 million

with an explanation with formulas and solution, please