Consider the following Balance Sheet related data for Kairful Finance Corp. (KFC), a Canadian schedule B bank. Amount (millions) 1. Assets Cash Short term loans Mortgages Required (3 parts): Total Assets 3. $ 80.00 228.00 152.00 $ 460.00 Duration 0.0 1.5 6.5 What is the duration of KFC's assets? Liabilities? And equity? Liabilities Customer chequing a/c's GIC'S Long term Financing Total Liabilities Amount (millions) $ Shareholders Equity Total Liabilities and Equity $ 120.00 147.50 147.50 415.00 45.00 460.00 2. If interest rates are currently 2% but increase to 4%, how much will KFC's equity change by (approximately)? Use the duration calculations to come up with your answer. KFC is considering managing its interest rate risk and achieving a duration neutral position. Assume it has the ability to buy or sell 10 year zero coupon bonds. What dollar value of these bonds should it buy or sell to achieve its desired duration neutral position? Duration 0.0 1.0 9.0

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