Immunize a Bank’s Portfolio Assume a bank has the following (very simplified) balance sheet. Assets Mortgages Fixed rate

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Immunize a Bank’s Portfolio Assume a bank has the following
(very simplified) balance sheet.
Assets
Mortgages
Fixed rate, 15 year, rate: 8%
Floating rate, 15 year, rate: LIBOR + 2%, (duration = 0)

Liabilities
Overnight deposits, rate: 0.6%, (duration = 0)
2 year CD, rate: 2%, assume it is a zero coupon
3 year CD, rate: 4%, assume it is a zero coupon

Calculate weights which will immunize the portfolio. Note this is a
set of weights, there is not one unique solution. You don’t have to
calculate the full set, just some set of weights which immunizes
the portfolio.