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The weighted average lifetime of a savings bank is 7 years. Its total liabilities are $900 million, and its assets are $1 billion. Requirement What

The weighted average lifetime of a savings bank is 7 years. Its total liabilities are $900 million, and its assets are $1 billion.

Requirement

  1. What is the dollar-weighted duration of the bank's passive portfolio if it has a zero leverage-adjusted timeframe?
  2. Does a zero duration gap mean that the bank perfectly hedges its interest rate risk? Comment with reference to time-related problems.

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