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Given the following balance sheet for Tetra Bank: Question: What is the bank's Duration of Assets (in years), Duration of Liabilities(in years), Duration GAP (in
Given the following balance sheet for Tetra Bank:
Question: What is the bank's Duration of Assets (in years), Duration of Liabilities(in years), Duration GAP (in years)? And If the market interest rate is expected to fall from 4% to 3%, what is the dollar change in Net Worth? What changes in portfolio composition would you recommend to management if you are expecting interest rates to rise? Assume that management is using a defensive strategy.
Assets Duration Amount 300 Floating rate loans Federal Funds Sold Fixed Rate Loans 1 year Duration Amount Liabilities & Equity 6 months 400 Variable Market Deposit Accounts 200 Federal Funds Purchased 4 years 900 Fixed Rate Liabilities Equity $1500 Total Liabilities & Equity 3 years 1 year 5 years 400 600 200 Total Assets $1500Step by Step Solution
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