What will your firm need to do to eliminate income gap using adjustments to rate sensitive asset ?

What should your firm do to immunize the market value of net worth from interest rate risk using duration

assume that the portion of fixed-rate mortgages that will mature within 1 year is 20%, portion of checkable deposits (10%), portion of savings (20%)) What a

Your employer has asked you to examine the interest-rate risk of your bank relative to your direct competition. Management is concerned that interest rates will fall by the end of the year and the decline actually occurs. see what would happen to the relative profitability of the firm wants Interest-rate risk depends on each bank's relative position of interest-sensitive assets and liabilities. You begin the analysis by collecting the information and estimates Bank Balance Sheet Competition Your Firm Duration (vears) Duration (vears) (Smillions) (Smillions) Assets Reserves and cash items 0.0 4 0.0 Se than 1 year 0.3 12 0.6 1,6 4 3 1-2 years Greater than 2 years Residential mortgages 4.0 5.0 7 04 A A 55 16 Fixed-rate (30 years) Commerical loans Less than 1 year 0.6 0.9 13 60 Greater than 2 vears 0.C 25 0.0 10 Physical capital Liabilities 1.0 14 1.0 10 deposits 05 0.6 Money market deposit accounts Savings deposits CDs 1.0 16 1,0 12 12 03 10 ear 1.8 22 10 1.1 8 1-2 years Greater than 2 years 10 2.9 15 00 14 0.0 10 Fed funds Borrowings 0 7 0.4 12 12 1 year 1-2 vears 3.8 31 2.9 39 Greater than 2 years