20. You are given the following balance sheet data for Banco Santander--Spain for 2019.

( Numbers are in billions of Euros) Assume no other assets or liabilities.

Assets

Cash 50 duration . 0 years

AAA bonds 100 duration - 2 years

4% Fixed rate Loans 300 duration = 4 years

3.5% Variable rate loans 100 duration - 0 years

buildings and premises 70 duration . 0 years

Total assets 620

Liabilities and Shareholder equity

Checking deposits 150 duration - 0

2% Time deposits 300 duration = 4 years

Long term borrowing 100 duration = 8 years

Equity 70 duration - 0 (or undefined)

Total liabilities and equity 620

Determine the following:

(A) the weighted average duration of assets (4 points)

(B) the weighted average duration of liabilities (4 points)

(C) Size and sign of the duration gap (5 points)

(D) Given the duration gap, is the worried about falling interest rates, rising rates, or is it perfectly hedged? (3 points)

(E) Assume all interest rates increase by 40 basis points. Determine the change in net shareholder wealth, or in equity, from this change. (assume a 3% average interest rate for the whole problem) (4 points)

(F) If the bank cannot engage in any derivative market transactions, explain what type of assets it should buy or sell and what type of liabilities it should buy or sell to reduce the duration gap.(5 points)

100 100 20. You are given the following balance sheet data for Banco Santander-Spain for 2019. (Numbers are in billions of Euros) Assume no other assets or liabilities. Assets Cash 50 duration - 2 years AAA bonds 100 duration - 2 years 4% Fixed rate Loans 300 duration - 4 years 3.5% Variable rate loans duration - 0 years buildings and premises 70 duration - years Total assets Liabilities and Shareholder equity Checking deposits 150 duration - 2x Time deposits 300 duration - 4 years Long tere borrowing duration - 8 years Equity 70 duration - (or undefined) Total abilities and equity Determine the following: (A) the weighted average duration of assets (4 points) (B) the weighted average duration of 11ab11ities (4 points) (C) Size and sign of the duration (points)