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3. this is another exam type question covering numerouse subtopics consider...

# Question: this is another exam type question covering numerouse subtopics consider...

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This is another exam type question, covering numerouse subtopics. Consider the following balance sheet (in million) for a bank: The bank’s leverage adjusted duration gap is____________(calculate to two decimals). With this duration gap the bank should worry about_________ (rising/falling) interest rates. In fact, if the relative change in interest rates is an increase of 1 per cent, that is ΔR/(1 + R) = 0.01, equity would change by _______________million dollars (use + / - to indicate increases / falls). The bank could ___________ (buy/sell) bond futures to create a macrohedge. Suppose that T-bond futures (contract size 1 million are currently priced at 960.000. The deliverable T-bond has a duration of nine years. Calculate how many contracts the bank should trade to hedge its risk. The rounded number of contracts is________________ .

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