Let's assume that the average duration of the loans in a firm is 9 years. The average duration of its

deposits is 3 years with k=L/A = 0.90 and total asset=$250 million. What is the gain or loss on the

futures position (that hedges against the risk of the rise in interest rate) using T-Bonds (Duration = 9

years, $95 per $100 face value, minimum contract size = $100,000) if the shock to interest rates is 1

percent (decrease) while the current interest rate is 8%?

Select one:

O a. Loss $12.67 million

O b. Loss $14.58 million

O c. Gain $14.88 million

O d. Loss $11.98 million

Oe. Gain $11.02 million