The Average Duration of the Loans Is 10 Years What Is the Net Gain or Loss on the Loan

question 77

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $$\begin{array} { | l | r | l | r | } \hline \text { Consumer loans } & \$ 50 \text { million } & \text { Deposits } & \$ 235 \text { million } \\\hline \text { Commercial Loans } & \$ 200 \text { million } & \text { Equity } & \$ 15 \text { million } \\\hline \text { Total Assets } & \$ 250 \text { million } & \text { Total Liabilities \& Equity } & \$ 250 \text { million } \\\hline\end{array}$$ What is the net gain or loss on the loan given that the exchange rates at the time of repayment were $1.63/? in the cash market and 1.62/? in the futures market? Assume that the futures position is opened and unwound as stated in previous question.

• A)$2,120,000 loss.
• B)$1,330,000 loss.
• C)$2,670,000 loss.
• D)$1,330,000 gain.
• E)$2,670,000 gain.

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