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/?.

---

Definitions:

Credible Content

Information that is trustworthy and reliable, often created with expertise and authority in a given field.

Baseline of Trust

A foundational level of confidence and reliance among individuals or groups, determining how much they trust each other.

Expert Content

High-quality information or materials created by individuals with specialized knowledge or skills in a particular area.

User-Generated Content

Any form of content, such as videos, blogs, discussion forum posts, digital images, audio files, etc., that has been posted by users on online platforms such as social media and websites.