Question

Lazy Days National Bank reports that its assets have a duration of 7 years and its...

Lazy Days National Bank reports that its assets have a duration of 7 years and its liabilities average 2.75 years in duration. To hedge this duration gap, management plans to employ Treasury bond futures, which are currently quoted at 112-170 and have a duration of 10.36 years. Lazy Days’ latest financial report shows total assets of $100 million and liabilities of $90 million. Approximately how many futures contracts will the bank need to cover its overall exposure?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Morning View National Bank reports that its assets have a duration of 6 years and its...
Morning View National Bank reports that its assets have a duration of 6 years and its liabilities average 2.35 years in duration. To hedge this duration gap, management plans to employ Treasury bond futures, which are currently quoted at 102-150 and have a duration of 8.36 years. Morning View’s latest financial report shows total assets of $120 million and liabilities of $86 million. Approximately how many futures contracts will the bank need to cover its overall exposure?
The average duration of the loans is 10 years. The average duration of the deposits is...
The average duration of the loans is 10 years. The average duration of the deposits is 3 years.    Consumer loans $50 million Deposits $235 million Commercial Loans $200 million Equity $15 million Total Assets $250 million Total Liabilities & Equity $250 million What is the number of T-bond futures contracts necessary to hedge the balance sheet if the duration of the deliverable bonds is 9 years and the current price of the futures contract is $96 per $100 face...
John is using the data from the balance sheet of a bank to determine its duration...
John is using the data from the balance sheet of a bank to determine its duration gap using the simple approach discussed in class. He collected the information below that covers all assets and liabilities in the bank’s balance sheet. Assets Value ($Millions); Duration (Years) Loans 170; 4.0 Securities 60; 3.2 Other Assets 20; 0.3 Liabilities Value ($Millions); Duration (Years) Deposits 190; 1.0 Other Borrowings 30; 2.0 Using this information and simple approach to measure the duration of assets and...
Stillwater Bank reports an average asset duration of 3.25 years and an average liability duration of...
Stillwater Bank reports an average asset duration of 3.25 years and an average liability duration of 1.75 years. Liabilities are $485 million, while assets total $512 million. Suppose that interest rates are 6% but rise to 7.5%. What will happen to Stillwater's net worth if interest rates rise? +$720 million +$208 million - $7.56 million -$11.5 million
Hedge Row Bank has the following balance sheet (in millions):   Assets $170   Liabilities $102   Equity 68...
Hedge Row Bank has the following balance sheet (in millions):   Assets $170   Liabilities $102   Equity 68   Total $170   Total $170 The duration of the assets is 7 years and the duration of the liabilities is 5.2 years. The bank is expecting interest rates to fall from 10 percent to 9 percent over the next year. a. What is the duration gap for Hedge Row Bank? (Round your answer to 2 decimal places. (e.g., 32.16))   Duration gap years b. What is...
A savings bank’s weighted average asset duration is 7 years. Its total liabilities amount to $900...
A savings bank’s weighted average asset duration is 7 years. Its total liabilities amount to $900 million, while its assets total $1 billion. What is the dollar-weighted duration of the bank’s liability portfolio if it has zero leverage adjusted duration gap?   Does zero duration gap mean the bank has hedged the interest rate risk perfectly? Comment on it by referring to the problems with duration.
A savings bank’s weighted average asset duration is 7 years. Its total liabilities amount to $900...
A savings bank’s weighted average asset duration is 7 years. Its total liabilities amount to $900 million, while its assets total $1 billion. What is the dollar-weighted duration of the bank’s liability portfolio if it has zero leverage adjusted duration gap? Does zero duration gap mean the bank has hedged the interest rate risk perfectly? Comment on it by referring to the problems with duration.
The duration of the assets of your bank is 5.3 years and the duration of your...
The duration of the assets of your bank is 5.3 years and the duration of your liabilities is 2.1 years. Your bank has $320,000 in assets, $300,000 in liabilities and $20,000 million in equity. Suppose the current fed funds rate is 2% and the Fed decides to increase interest rate by 50 basis points. What is the change in your bank’s net worth? -522.55 5,225.49 -4,800 4,800 None of the above
please show work thank you!!!!!!! 1. Bank of RGV is a successful regional bank with common...
please show work thank you!!!!!!! 1. Bank of RGV is a successful regional bank with common equity share outstanding 1 million. It pays $10 dividend each year and expected to grow 5% in period 1. The appropriate discount rate to reflect shareholder risk is 10%. Answer below question using below data pertains to Bank of RGV: Below numbers are in 1000’s. Balance sheet                                                      Income statement Cash                                                   $100                Interest income                                       $400                                        Securities investments                         $600                interest expense...
Amex bank reports an average asset duration of 7 years and an average liability duration of...
Amex bank reports an average asset duration of 7 years and an average liability duration of 4 years. The bank recorded total assets of $1.8 billion and total liabilities of $1.5 billion. If the interest rates began at 6 percent and then suddenly dropped at 5 percent, what change will occur in the value of Amex’s net worth? Logically explain your result in detail. Now, suppose the interest rate is 6 percent and moves up by 1 percent; keeping everything...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT