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Use the following information to answer the question(s) below.
You are a risk manager for Security First Trust Savings and Loan (SFTSL) .SFTSL's balance sheet is as follows (in millions of dollars) : The duration of the auto loans is three years and the duration of the mortgages is eight years.Both cash reserves and checking and savings have zero duration.The CDs have a duration of two years and the long-term financing has a ten-year duration.
-If interest rates are currently 5%,but fall to 4%,your estimate of the approximate change in SFTSL equity is closest to:
Political Risk
In international business, the chance that the value of a firm’s investment in a foreign country will be reduced by political actions of either the foreign government or terrorists.
Exchange Rate Risk
The risk that international trade dealings will earn less than expected because of movement in exchange rates.
Economic Risk
The possibility of loss caused by macroeconomic or market conditions, such as changes in interest rates or recessions.
Forward Rate
The agreed upon exchange rate for a currency transaction that will occur at a future date.
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