Question
You have gathered the following market value and duration information on Friendly Bank: Assets: Market value (in millions) Duration Overnight money $ 3.7 .0 1-year
You have gathered the following market value and duration information on Friendly Bank: Assets: Market value (in millions) Duration Overnight money $ 3.7 .0 1-year
Treasury securities 8.2 .5
Loans 11.6 1.8 Mortgages 11.9 7.9 $ 35.4
Liabilities: Checking accounts $ 13.9 .0
Short-term CD’s 4.5 .4
Long-term CD’s 10.9 3.5 $ 29.3 What new asset duration will immunize the balance sheet?
Step by Step Solution
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Step: 1
To immunize the balance sheet the modified duration of the banks assets should be made equal to the ...
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Financial Management For Decision Makers
Authors: Peter Atrill, Paul Hurley
2nd Canadian Edition
138011605, 978-0138011604
