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Formosa Independence Bank has DA = 2.45 years and DL = 1.08 years. In addition, this bank has total assets of $375 million and liabilities
- Formosa Independence Bank has DA = 2.45 years and DL = 1.08 years. In addition, this bank has total assets of $375 million and liabilities of $337.5 million.The CFO of Formosa Independence Bank wishes to effectively reduce the duration gap to one year by hedging with T-Bond futures that have a market value of $115,000 and a DFut = 8 years.How many contracts are needed, and should the bank buy or sell them? (D = duration.)
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Multinational Business Finance
Authors: David K. Eiteman, Arthur I. Stonehill, Michael H. Moffett
13th edition
132743469, 978-0132743464
