ASSETS
Cash reserves $50 / 0 YEARS
Autoloans $100 / 2 YEARS
Mortgages $150 / 7 YEARS
TOTAL ASSETS $300
LIABILITIES
Checking and savings $80 / 0 YEARS
GICS $100 / 2 YEARS
Long-term financing $100 / 10 YEARS
TOTAL LIABILITIES 280
EQUITY $20
TOTAL LIABILITIES AND EQUITY $300
1) What is the duration of equity?
2) Rash and mortgages prepayments reduced mortgages from 150 to 100. What is the duration of equity?
3) If interest rates fall from 4 percent to 3 percent, what is the chage in the value of equity?
4) After mortgage decrease to 100 but before change in interest rate, what amount of long term bonds should be bought to eliminate interest risk?