You calculate that the duration of the assets of your bank is 5.5 years and the duration of your liabilities is 3.2 years. You currently have $70 million in liabilities and $5 million in equity. Calculate the new value of your liabilities if interest rates were to decrease from 6% to 4.5%.

66,830,188.68

66.83

73,169,811.32

73.17

None of the above

1. You own a callable bond with 6 years left to maturity. It has a face value of $1000. It pays semiannually, has a 6.3% yield and a 5.7% coupon rate. The call premium is $20. Calculate how much the bond issuer will make if these bonds were called in.

   		$49.60
   		$20
   		$49.23
   		$231.57
   		They wouldnt call the bonds in.