When you analyze the duration of loans, you find that the duration of the auto loans is 1.8 years, while the mortgages have a duration of 6.9 years. Both the cash reserves and the checking and savings accounts have a zero duration. The CDs have a duration of 1.9 years, and the long-term financing has a 9.2-year duration.

a. What is the duration of Acorn's equity? ((Round to two decimal places.)

b. Suppose Acorn experiences a rash of mortgage prepayments, reducing the size of the mortgage portfolio from $ 152.8 million to $ 101.9 million, and increasing cash reserves to $ 101.3 million. What is the duration of Acorn's equity now? If interest rates are currently 4 % and were to fall to 3 % estimate the approximate change in the value of Acorn's equity. (Assume interest rates are APRs based on monthly compounding.)

c. Suppose that after the prepayments in part (b), but before a change in interest rates, Acorn considers managing its risk by selling mortgages and/or buying 10-year Treasury STRIPS (zero coupon bonds). How many should the firm buy or sell to eliminate its current interest rate risk?