The Average Duration of the Loans Is 10 Years What Should Be the Trading Price of the BP Futures

question 100

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 should be the trading price of the BP futures contract at the end of the year in order for the FI to be perfectly hedged? That is, the FI earns its original anticipated spread without any effects of exchange rate changes?

• A)$1.60/?.
• B)$1.61/?.
• C)$1.62/?.
• D)$1.63/?.
• E)$1.64/?.

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