Bank of Charub ($ million)

Assets: Liabilities and Net Worth:

270 day US Treasury bills $500m 1 year Certificates of Deposit $550m

2 year consumer loans Demand Deposits $750m

Fixed rate, 12% p.a. annually $275m 2 year Bonds $175m

7 year commercial loans $350m Fixed rate, 7.5% p.a. annually

Fixed rate, 9% p.a. annually Overnight Fed Funds $350m

10 year fixed rate mortgages $675m

Fixed rate, 6.5% p.a. monthly

10 year floating rate mortgages $125m Equity $100m

LIBOR+50bp, monthly roll date

Notes: The 1 year Certificates of Deposit pay 1.95% p.a. annually. The demand deposits are non-interest bearing and have a duration of zero. The 7 year commercial loans have a duration of 4.75 years. The fixed rate mortgages have a duration of 8.3 years. All values are market values.

1. What is the duration of the floating rate mortgages?
   1. 0.25 years
   2. 10 years
   3. 2 years
   4. 0.08 years
   5. There is not enough information to answer the question.

2. What is the duration of the 2 year bonds they are selling at par at 7.5% p.a. interest, compounded annually?
   1. 1.93 years
   2. 1 year
   3. 2 years
   4. 1.5 years
   5. 3.86 years

3. What is the face value of the 2 year consumer loans if they yield 6% p.a. with a coupon rate of 12% p.a. paid annually?
   1. $175 million
   2. $165 million
   3. $247.7 million
   4. $155 million
   5. $172 million

4. What is the duration of the 2 year consumer loans if they yield 6% p.a. with a coupon rate of 12% p.a. paid annually?
   1. 1.87 years
   2. 3.84 years
   3. 2 years
   4. 0.5 years
   5. 1.9 years

Please show work