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  3. 4) a local bank has the following balance sheet (i

4) A local bank has the following balance sheet (in million dollars): Durations are as...

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4) A local bank has the following balance sheet (in million dollars): Durations are as follows: Treasuries: 6 months Floater: 1 year Fixed Rate Mortgage: 5 years Deposits: 1 year a) What is the duration of the banks equity if the bank's position is fully hedged? What does this duration mean for shareholders? b) Suppose interest rates move from 3% to 4% (term structure is flat). Calculate the change in the value of bank's equity using duration? Will the actual change be more or less than your calculated value? Explain briefly

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