Question: Please show work A bank has an average asset duration of 9 years, an average liability duration of 5 years, total assets of $600 million,

Please show work

A bank has an average asset duration of 9 years, an average liability duration of 5 years, total assets of $600 million, and liabilities of $400 million at a given point in time. suppose too that the firm plans to trade in treasury bond future contracts. The T-bonds named in thefutures contracts have duration of 10 years, and the t-bonds current price is $99,700 per $100,000 contract. How many futures contracts doe the bank need to cover a given risk exposure?

What is the change in net worth of the bank if interest rate dcreases from 9% to 5%.

As we notice that the bank has positive duration gap (indicating its assets have longer average maturity than its liabilites) What sort of hedging strategy should the bank adopt if the interest rate declines?

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