The Average Duration of the Loans Is 10 Years What Is the Number of T-Bond Futures Contracts Necessary to Duration

question 125

Multiple Choice

The average duration of the loans is 10 years.The average duration of the deposits is 3 years. $\begin{array}{llr}\text { Consumer loans } & \$ 50 \text { million Deposits } & \$ 235 \text { million } \\\text { Commercial Loans } & \$ 200 \text { million Equity } & \$ 15 \text { million } \\\text { Total Assets } & \$ 250 \text { million Total Liabilities \& Equity } & \$ 250 \text { million }\end{array}$

What is the number of T-bond futures contracts necessary to hedge the balance sheet if the duration of the deliverable bonds is 9 years and the current price of the futures contract is $96 per $100 face value?

• A)1,630 contracts.
• B)1,475 contracts.
• C)1,900 contracts.
• D)2,078 contracts.

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