Use the following information to answer Questions #23 to #25.

Balance Sheet of the CSUSM Bank

23. Assets Market Value Duration

Overnight money 50 million 0

Treasury Bills 100 million 1 year

Inventory Loans 125 million 1.6 years

Industrial Loans 75 million 3 years

Mortgage Loans 150 million 20 years

Value(assets) = 500 million D(assest) = ??? years

23. Liabilities

Checking &Savings Acct 210 million 0

CDs 150 million 2

Long-term Bonds 90 million 10

Value(liabilities) = 450 million D(liab.) = ??? years

23. Equity E = 50 million

23. What are the durations of the CSUSM Banks assets and liabilities? (Hint: the portfolio duration is the market-value weighted average duration of individual assets in the portfolio)

A. D(assest) = 4.33 years; D(liab.) = 2.56 years.

B. D(assest) = 5.75 years; D(liab.) = 2.88 years.

C. D(assest) = 6.48 years; D(liab.) = 3.20 years.

D. D(assest) = 7.05 years; D(liab.) = 2.67 years.

E. D(assest) = 7.55 years; D(liab.) = 3.06 years.

24. Assume the average interest rate (y) is currently 5%; if y suddenly jumps to 6%, what would happen to the value of the CSUSM Banks equity?

A. The equity value would increase by $10.34 million

B. The equity value would decrease by $14.72 million

C. The equity value would decrease by $19.67 million

D. The equity value would decrease by $22.16 million

E. The equity value would increase by $12.75 million

25. To immunize the equity of the bank from interest rate risk, what should be the asset duration of the bank if the duration of the liabilities remains unchanged?

A. 2.25 years

B. 3.45 years

C. 2.40 years

D. 4.33 years

E. 2.67 years

Need help with question 25 and 24 in particular. I believe 25 is E since it would match the duration of the liabilities. Look forward to your answer!!