The Average Duration of the Loans Is 10 Years Assume That the Hedge Was Placed as Indicated in a Duration

question 126

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $$\begin{array} { | l | r | l | r | } \hline \text { Consumer loans } & \$ 50 \text { million } & \text { Deposits } & \$ 235 \text { million } \\\hline \text { Commercial Loans } & \$ 200 \text { million } & \text { Equity } & \$ 15 \text { million } \\\hline \text { Total Assets } & \$ 250 \text { million } & \text { Total Liabilities \& Equity } & \$ 250 \text { million } \\\hline\end{array}$$ Assume that the hedge was placed as indicated in a prior question, and that the BP futures contract is trading at $1.62/?.Assume the futures contract has some days remaining to maturity.What will be the gain or loss on the hedge if it is unwound at this price?

• A)$4,280,000 loss.
• B)$4,000,000 loss.
• C)$4,280,000 gain.
• D)$4,000,000 gain.
• E)$6,400,000 gain.

---

Definitions:

Software Distribution

The process of delivering software to the end-user or making it available for download or installation.

Wi-Fi

The 802.11 standard for wireless data transmissions established by the Institute of Electrical and Electronics Engineers (IEEE).

4 Pairs of Copper Wires

Used primarily in telecommunications, four pairs of twisted copper wires found in Ethernet cables, like Cat5, enable data transmission through electrical signals.

Network Adapter

A device that facilitates the connection of a computer to a network, enabling data exchange with other computers and devices.