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QUESTION 7 Assets Liabilities A = $100 m L = $90 m E = $10 m Assume that the average duration of assets is 5

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QUESTION 7 Assets Liabilities A = $100 m L = $90 m E = $10 m Assume that the average duration of assets is 5 while the average duration of liabilities is 3 years. You are the liability manager of the bank and your boss is unhappy about the interest rate risk. How should you change the duration of the liability side to eliminate all interest rate risk? Provide your answer by calculating the new liability duration with two decimals

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