Village Bank has $310 million worth of assets with a duration of 12 years and liabilities worth $248 million with a dura

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answerhappygod
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Village Bank has $310 million worth of assets with a duration of 12 years and liabilities worth $248 million with a dura

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Village Bank has $310 million worth of assets with a duration of
12 years and liabilities worth $248 million with a duration of five
years. In the interest of hedging interest rate risk, Village Bank
is contemplating a macrohedge with interest rate T-bond futures
contracts now selling for 104-20 (30nds). The T-bond underlying the
futures contract has a duration of eight years. If the spot and
futures interest rates move together, how many futures contracts
must Village Bank sell to fully hedge the balance sheet?
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