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Key west bank has been making high volume (150) of 30 years fixed rate mortgage loans at 4%. The bank is worried about rising intetest
Key west bank has been making high volume (150) of 30 years fixed rate mortgage loans at 4%. The bank is worried about rising intetest rates and the impact on the net income and net worth of the bank. If rates rise 100 basis pointshow much interest income will they lose on the loan and if they enter a hedge to reduce this risk what type of hedge strategy might the bank utilize to manage this risk?
A.1.5m, received fixed/pay float swap
B.8.25m long futures hedge
c.6m, short futures hedge
d.1.5m, receive float/ pay fixed swap
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