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  3. (2.)suppose the first national bank of duluth has

(2.)Suppose the First National Bank of Duluth has $500.00 million in total assets with an average...

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Finance

(2.)Suppose the First National Bank of Duluth has $500.00 millionin total assets with an average asset duration offive years. Assumethat the bank’s liabilities are comprisedof $86.75 million ofdemand deposits and $163.75 million inbonds with a 4.00% couponrate (which pays annually) and a fiveyear time-to-maturity. Furtherassume that currentmarket interest rates are at 9.00% per annum.


(a.)(2 point) Calculate the duration of the bank’sbonds.

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(2.)Suppose the First National Bank of Duluth has $500.00 millionin total assets with an average asset duration offive years. Assumethat the bank’s liabilities are comprisedof $86.75 million ofdemand deposits and $163.75 million inbonds with a 4.00% couponrate (which pays annually) and a fiveyear time-to-maturity. Furtherassume that currentmarket interest rates are at 9.00% per annum.(a.)(2 point) Calculate the duration of the bank’sbonds.

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