The numbers provided are in millions of dollars and reflect market values:

Cash 20 Deposits 200

T-Bills 30 days (4.5%, PAR) 50 (Historical avg. maturity=4 years

T-Bills 91 days (5.0%, PAR) 60 (Historical avg. duration=3.5 years

Commercial Loans 300 Certificates of Deposit 150

(Avg. maturity = 9.0 years) (Avg. maturity=6 months)

(Avg. duration = 7.5 years) (Avg. duration=6 months)

Consumer Loans 200 Short-term Debt 150

(Avg. maturity = 6.0 years) (Avg. maturity=4 years)

(Avg. duration = 4.0 years) Long-term Debt 200

Mortgage Loans - Fixed Rate 200 (Avg. maturity=15 years)

(Avg. maturity = 30 years) (Avg. duration=12 years)

(Avg. Duration = 25 years) Equity 130

TOTAL ASSETS 830 TOTAL LIABILITY & EQUITY 830

A. The short-term debt of the DePaul University Bank consists of 4-year bonds paying an annual coupon of 4 percent and selling at par. What is the duration of the short-term debt?

B. What is the weighted average duration of the assets of the bank?

C. What is the weighted average duration of the liabilities of the bank?

D. What is the leveraged adjusted duration gap of the bank?

E. Discuss how the bank's risk management manager could restructure its liabilities to reduce

interest rate exposure. Quantify how much it must change the duration of its liabilities.

Answer rating: 100% (QA)

A The duration of the shortterm debt can be calculated using the following formula textDuration frac... View the full answer