12. A FI that has assets of $1 million whose duration has been estimated at 9.9 years. It has liabilities of $800,000 financed through a coupon bond with duration of 1.9. • Calculate the leverage-adjusted duration gap of the FI • What is the impact on equity values if all interest rates fall 20 basis points – that is, Δ? 1+R = −0.20%.
12. A FI that has assets of $1 million whose duration has been estimated at 9.9 years. It has liabilities of $800,000 financed through a coupon bond with duration of 1.9. • Calculate the leverage-adjusted duration gap of the FI • What is the impact on equity values if all interest rates fall 20 basis points – that is, Δ? 1+R = −0.20%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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12.
A FI that has assets of $1 million whose duration has been estimated at 9.9 years. It has liabilities of $800,000 financed through a coupon bond with duration of 1.9. • Calculate the leverage-adjusted duration gap of the FI • What is the impact on equity values if all interest rates fall 20 basis points – that is, Δ? 1+R = −0.20%.
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