D Question 16 5 pts A bank has assets of $800,000,000 and equity of $70,000,000. The assets have an average duration of 6.2 years, and the liabilities have an average duration of 3.4 years. A 7-year fixed-rate T-bond with the same coupon as the fixed-rate on the swap has a duration of 48 years, and the floating-rate bond that reprices annually. The bank wishes to hedge its balance sheet with swap contracts that have notional contracts of $50,000. What is the optimal number of swap contracts into which the bank should enter? 16,001 contracts 16,000 contracts 13,042 contracts 12,494 contracts D Question 17 5 pts An Fl has entered a $300 million swap agreement with a counterparty. The fixed-payment portion of the swap is similar to a government bond with maturity of 7 years and duration of 5.5 years. The swap payment interval is 1 year. If the relative shock to interest rates [R/(1+R]] is a decline of 75 basis points, what will be the change in market value of the swap contract? $10,125,000 -$13,500,000 O $2,250,000 O-$2,250,000 The next 4 questions are related to each other...you may need to refer to information contained in this set of questions to answer them correctly. Question 4 5 pts Equity Consider the following balance sheet (in millions) for an Fl: Assets Liabilities Duration - 9 years($860) Duration = 2 years($760) What is the Fl's duration gap? $100 O 7.00 years O 723 years 0 -7.23 years 0 -7.00 years D D Question 5 6 pts Consider the following balance sheet (in millions) for an FS Assets Liabilities Equity Duration - 9 years($860) Duration - 2 years($760) $100 What is the impact on the Fi's equity value if the relative change in interest rates is an increase of 2 percent? That is, (Change in R/(1+R) - 0.02 Question 17 5 pts An Fl has entered a $300 million swap agreement with a counterparty. The fixed-payment portion of the swap is similar to a government bond with maturity of 7 years and duration of 5.5 years. The swap payment interval is 1 year. If the relative shock to interest rates (R/(1 + R)) is a decline of 75 basis points, what will be the change in market value of the swap contract? -$10,125,000 O $13,500,000 $2,250,000 -$2,250,000 D Question 18 5 pts An Fl has $625 million of assets with a duration of 8 years and $500 million of liabilities with a duration of three years. The Fl wants to hedge its duration gap with a swap that has fixed-rate payments with a duration of 4.5 years and floating-rate payments with a duration of 1.5 years. What is the optimal amount of the swap to effectively macrohedge against the adverse effect of a change in interest rates on the value of the Fl's equity? $777.777778 O $2,333,333,333 $3,500,000,000 $1,166,666,667 Consider the following balance sheet (in millions) for an Fl: Assets Liabilities Equity Duration - 9 years($860) Duration - 2 years($760) $100 What is the impact on the FI's equity value if the relative change in interest rates is an increase of 2 percent? That is, (Change in R)/(1+R) - 0.02. -$109,896,000 O $-124,356,000 $121,917,647 -$106.400.000 Question 6 6 pts Consider the following balance sheet (in millions) for an FI: Assets Liabilities Equity Duration - 9 years($860) Duration - 2 years($760) $100 Suppose that the Fl macrohedges using Treasury bond futures that are currently priced at 97. What is the impact on the Fl's futures position if the relative change in all interest rates is an increase of 2 percent? That is, (Change in R)/(1+R) - 0.02. Assume that the deliverable Treasury bond has a duration of 8.5 years. $16,167 per contract O $17.000 per contract $16,490 per contract $14.026 per contract Question 7 6 pts Using your answers/information from the previous 3 questions... If the Fl wanted to attempt a perfect macrohedge, how many Treasury bond futures contracts does it need? 10.197 contracts 8,866 contracts 6,493 contracts 7,541 contracts The next 3 questions are related to each other..you may need to refer to information contained in this set of questions to answer them correctly. Question 8 5 pts AU.S. based Fl has assets denominated in Euros of 150 million and Euro liabilities of 130 million. The Euro currency futures contract size is 125,000euro. Assume a perfect hedge, where hedge ratio is 1.0, the basis risk is zero and the movement of the hedge with the movement of the underlying currency is 100% inverse correlation What is the FI's net exposure? 150 million euro 130 milion euro 20 million euro