The ALCO committee believes that = 0.01 would be a reasonable estimate of relevant interest rate movements.

If the 90-day bank bill futures are quoted at 96.0 and there is no basis risk, calculate the number of future contracts to macro-hedge the bank's balance sheet.

Show all calculations and specifically state whether a short or long position is recommended.

QUESTION 4 [10 Marks] Balance Sheet (Amount in millions, Duration in years) Assets Amount Duration Liabilities Amount Duration Cash 60 Core Deposits 140 1.5 yrs Treasury Bonds 100 3.00 yrs Euro CDs ? 1.5 yrs Loans (variable) 210 0.75 yrs Debentures 100 3.0 yrs Loans (fixed) 130 3.25 yrs Equity 45 The ALCO committee believes that AR 1 + R = 0.01 would be a reasonable estimate of relevant interest rate movements. . 11 . 1 . 10 . 1 . 9 . 1 . 8 . If the 90-day bank bill futures are quoted at 96.0 and there is no basis risk, calculate the number of future contracts to macro-hedge the bank's balance sheet. Show all calculations and specifically state whether a short or long position is recommended