The weighted average lifetime of a savings bank is 7 years. Its total liabilities are $900 million, and its assets are $1 billion.

Requirement

1. What is the dollar-weighted duration of the bank's passive portfolio if it has a zero leverage-adjusted timeframe?
2. Does a zero duration gap mean that the bank perfectly hedges its interest rate risk? Comment with reference to time-related problems.
3. 
   

Answer rating: 100% (QA)

To calculate the dollarweighted duration of the banks passive portfolio we need to know the duration and market value of each asset and liability Howe... View the full answer