O Updated F23 Hedging DGAP and EVE Value Duration Liabilities Value Duration Assets 000s Rate (Years) and Equity 000s Rate (Years) Cash Time 2 275 3.00% Floating Loans $ 2.565 5.0% 5.15 CDS 1885 4.25% Bonds A 1009 4.75 3.74 MMDAS 1350 3.15% 1751 Bonds B 993 5.25% 2.85 Equity 57 Total 5.567 3.559 5.567 2 266 Bond A $1000 bond at 4.75%% coupon paid annually, current rates are 4.50% Bond matures in 4 years. Bond has no options Bond B $1000 bond at 5.25% coupon paid annually. current rates are 5.50% Bond matures in 3 years. Bond has no options. PV of Bond A $1.008.97 Pv of Bond B 1993.26 Modified duration bond A 3.570 Modified duration bond B 2.708 Weighted Average Duration of Assets 3.56 20 Weighted Average Duration of Liabilities 2 27 21 Duration Gap 1316 22 Weighted Average Return of Assets (WROA] 4.10% 23 Weighted Average Cost of Liabilities (WCOL) 3 46% EVERYTHING ABOVE IS GIVEN IN THIS EXERCISE. DON'T EXPECT THAT GOING FORWARD Estimated changed in EVE assuming interest rate change: 100% Objective: The bank would like to hedge its balance sheet for 3-month Eurodollars futures with 3-month maturity from today. 98.25 What is maket value of futures to arrive achieve a zero DGAP? How many contracts will be required? Should the bank take a long or short in the futures market? Assume the bank executes Eurodollar futures contracts for 3-months. Note: This is the same as the previous answer from $5i de sare you manually gyps it a mitoe sember otherwise it will create a large rounding error. After 3-months 96.65 What is the gainiloss after you close the futures position? What is the net impact of the 3-month hedg Sheet1 + Ready Accessibility: Investigate