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Unformatted text preview: Assets are more sensitive to change in interest rates, i.e. decrease in the value of assets will be more than decrease in the value of liabilities Question 3 a) Effect on equity Duration gap 3.2 Assets 100,000 Relative change in int. rates 0.0075 Effect on equity (2,400) Loss b) Number of Future contracts Gain on Futures 2,400 Gain Duration of underlying bond 3.2 Quote price 92 Future contract size 1,000 Number of contracts 0.8 One contract Question 4 Rate sensitive assets 3000 Rate sensitive liabilities 2500 a)Expected increase in R 1% b)Expected increase in R-1% a) Repricing Gap 500 a) Change in NII 5 One 10% coupon bond, 4 yrs maturity, FV =1000, annually Two 8% coupon bonds, 4 yrs maturity, FV = 1000, annually One 12% coupon bond, 4 yrs maturity, FV =1000, annually Company ABC is exposed to increase in interest rates Equity = total assets - total liabilities...
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This note was uploaded on 03/11/2012 for the course FIN FIN 3230 taught by Professor Petrivanov during the Spring '12 term at Kazakhstan Institute of Management, Economics and Strategic Research.
- Spring '12