Question
Parramatta Bank has assets of $181 million and liabilities of $151 million. The asset duration is 6.3 years and the duration of the liabilities is
Parramatta Bank has assets of $181 million and liabilities of $151 million. The asset duration is 6.3 years and the duration of the liabilities is 3.3 years. Market interest rates are 8 per cent. Parramatta Bank wishes to hedge the balance sheet with bank accepted bill futures contracts with a market value of $98 per $100 of face value.
b) How many contracts are necessary to fully hedge the bank? (enter a number]
A depository institution has the following assets in its portfolio: $23 million in cash reserves with the Reserve Bank, $21 million in T-notes and $56 million in mortgage loans. If the assets need to be liquidated at short notice, the depository institution will receive only 99 per cent of the fair market value of the T-notes and 85 per cent of the fair market value of the mortgage loans. Estimate the liquidity index for the portfolio. (round to four decimal places)
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