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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
- What is the dollar-weighted duration of the bank's passive portfolio if it has a zero leverage-adjusted timeframe?
- 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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To calculate the dollarweighted duration of the banks passive portfolio we need to know the duration and market value of each asset and liability Howe...Get Instant Access to Expert-Tailored Solutions
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