Question
Refer once again to your answer in Question 5. Did the bank's immunization strategy depend upon market interest rates rising over the course of the
Refer once again to your answer in Question 5. Did the bank's immunization strategy depend upon market interest rates rising over the course of the coming year, or is the bank's profit position protected from both increases and decreases in the level of market interest rates? Explain your answer by demonstrating the bank's net gain or loss on each of the three components of its minority lending program, assuming the market interest rates fall over the course of the coming year. In this case, assume that the following interest rates and futures contract prices are observed one year from today, and recalculate BSB's net gain or loss on each component of the minority lending program: One-year Treasury security spot rate 4.3% One-year bank certificate of deposit rate 4.0% FNMA yield 5.5% Treasury bond futures contract price 124-03 Treasury bill futures contract price 95.93 Eurodollar futures contract price 97.91
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