Question
Consider the following. (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. Calculate the leverage-adjusted duration
Consider the following.
(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))
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.
Ans: ________years
b.What is the impact on equity values if all interest rates fall 10 basis pointsthat is, R/(1 + R/2) = -0.0010?
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