Question: Please show work for rating An FI is planning the purchase of a $4 million loan to raise the average duration of its assets from

Please show work for rating

An FI is planning the purchase of a $4 million loan to raise the average duration of its assets from 3.5 to 5.0 years. The FI currently has total assets worth $20 million, with $4 million in cash (duration of zero) and $16 million in loans.

A) Assuming the bank uses the cash to purchase the loan, should the bank purchase the loan if its duration is 8 years? B) What duration loan should the FI purchase to obtain an asset duration of 5?

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