The average duration of the loans is 10 years. The average duration of the deposits is 3 years.

 If the current (spot) rate for one-year British pound futures is currently at $1.58/≤ and each contract size is ≤62,500.

How many contracts are required to be purchased or sold in order to fully hedge against the pound exposure? (Assume no basis risk). Buy 1,712 BP futures.

 

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Consumer loans Commercial Loans Total Assets $50 million $200 million Deposits Equity $235 million $15 million $250 million Total Liabilities & Equity $250 million Consumer loans Commercial Loans Total Assets $50 million $200 million Deposits Equity $235 million $15 million $250 million Total Liabilities & Equity $250 million

Answer rating: 100% (QA)

Given Consumer Loans 50 million Commercial Loans 235 million Total Assets 250 ... View the full answer