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4 , ( 10 points) Suppose a bank has the following balance sheet . Assets Liabilities Overnight Loans ( D* = 0 ) $ 300 Long Term CDS $800 3 - Year
4, (10 points) Suppose a bank has the following balance sheet. Assets Liabilities Overnight Loans (D ∗=0) $300 Long Term CDs (D ∗=8 periods) $800 3-Year Treasuries (D ∗=2.7 periods) $300 5-Year Loans (D ∗= 4.5 periods) $300 Net Worth $100 A) What is the Modified Duration of Net Worth? What is the dollar amount change in net worth using duration approximation if per period interest rate goes up by 1%? B) How would you duration-hedge this balance sheet with Treasury bond futures that are currently priced at $96 (per $100 in value of the underlying), assuming that the underlying bond has a modified duration of 3 periods? (I want to know the size of the position (
4 , ( 10 points) Suppose a bank has the following balance sheet .AssetsLiabilitiesOvernight Loans ( D* = 0 )$ 300Long Term CDS$8003 - Year Treasuries ( D* = 2. 7 periods )$300( D* = 8 periods )5 - Year Loans ( D* = 4.5 periods )$300Net Worth$100A ) What is the Modified Duration of Net Worth ? What is the dollar amount change in networth using duration approximation if per period interest rate goes up by 1 %/ ?B) How would you duration- hedge this balance sheet with Treasury bond futures that are*currently priced at $96 ( per $1DO in value of the underlying ) , assuming that theunderlying bond has a modified duration of 3 periods ? ( I want to know the size of theposition ( N F X PF ) , and also whether you long or short the futures . )( ) How would you duration- hedge this balance sheet with an interest rate swap with afixed- rate side having a modified duration of 4 periods and a floating - rate side having*a modified duration of I period ? ( I want to know the notional principal ( NP ) of theposition , and also whether you receive the fixed rate or the floating rate . )