Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 12...
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Consider the following balance sheet (in millions) for an FI: Assets Liabilities Duration = 12 years $ 1,040 Duration = 2 years $ 950 Equity 90
d. What is the impact on the FIs equity value if the relative change in interest rates is an increase of 1 percent? That is, R/(1 + R) = 0.01. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in dollars not in millions.)
e. Suppose that the FI in part (c) macrohedges using Treasury bond futures that are currently priced at 93. What is the change in value per futures contract used to hedge if the relative change in all interest rates is an increase of 1 percent? That is, R/(1 + R) = 0.01. Assume that the deliverable Treasury bond has a duration of eleven years. The bonds underlying the futures contract have a par value of $100,000. (Negative amount should be indicated by a minus sign. Enter your answer in dollars not in millions.)
f. If the FI wants to macrohedge, how many Treasury bond futures contracts does it need? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round down your answer to the nearest whole number.)
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