Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Consider the following.
a. Calculate the leverage-adjusted duration gap of an FI that has assets of $2.3 million invested in 30-year, 9 percent semiannual
coupon Treasury bonds selling at par and whose duration has been estimated at 10.07 years. It has liabilities of $1,030,000 financed
through a two-year, 6.00 percent semiannual coupon note selling at par with a duration of 1.9143.
b. What is the impact on equity values if all interest rates fall 10 basis points-that is, AR/(1+ R/2) = -0.0010?
(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16))
a. Leveraged adjusted duration gap
b. Change in net worth using leveraged adjusted duration gap
years
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Transcribed Image Text:Consider the following. a. Calculate the leverage-adjusted duration gap of an FI that has assets of $2.3 million invested in 30-year, 9 percent semiannual coupon Treasury bonds selling at par and whose duration has been estimated at 10.07 years. It has liabilities of $1,030,000 financed through a two-year, 6.00 percent semiannual coupon note selling at par with a duration of 1.9143. b. What is the impact on equity values if all interest rates fall 10 basis points-that is, AR/(1+ R/2) = -0.0010? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a. Leveraged adjusted duration gap b. Change in net worth using leveraged adjusted duration gap years
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