n A financial intermediary's balance sheet is such that DA= 5, DL= 3. This Fl has...
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n A financial intermediary's balance sheet is such that DA= 5, DL= 3. This Fl has $300 million in assets and net worth (equity) of $50 million. The CFO points out that there is a 4-year SWAP contract available. This SWAP pays 5% fixed (s.a) against 6-month LIBOR. He also mentions that the duration of 4-year T- Bonds with a 5% coupon (semi-annual) is 3.2 years. What side of the SWAP should the Fl and what should be notional principal of the contract to fully hedge the interest rate exposure? Pay Notional principal is $ (Express your answer in dollars, not millions, and round your answer to the nearest dollar) n A financial intermediary's balance sheet is such that DA= 5, DL= 3. This Fl has $300 million in assets and net worth (equity) of $50 million. The CFO points out that there is a 4-year SWAP contract available. This SWAP pays 5% fixed (s.a) against 6-month LIBOR. He also mentions that the duration of 4-year T- Bonds with a 5% coupon (semi-annual) is 3.2 years. What side of the SWAP should the Fl and what should be notional principal of the contract to fully hedge the interest rate exposure? Pay Notional principal is $ (Express your answer in dollars, not millions, and round your answer to the nearest dollar)
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