Questions from Financial Markets

Q: Laura, a bond portfolio manager, administers a $10 million

Laura, a bond portfolio manager, administers a $10 million portfolio. The portfolio currently has a duration of 8.5 years. Laura wants to shorten the duration to 6 years using T-bill futures. T-bill f...

Q: Chicago Bank and Trust has $100 million in assets and $

Chicago Bank and Trust has $100 million in assets and $83 million in liabilities. The duration of the assets is 5.9 years, and the duration of the liabilities is 1.8 years. How many futures contracts...

Q: A bank issues a $3 million commercial mortgage with a nominal

A bank issues a $3 million commercial mortgage with a nominal APR of 8%. The loan is fully amortized over 10 years, requiring monthly payments. The bank plans on selling the loan after two months. If...

Q: Springer County Bank has assets totaling $180 million with a duration

Springer County Bank has assets totaling $180 million with a duration of five years, and liabilities totaling $160 million with a duration of two years. Bank management expects interest rates to fall...

Q: A bank issues a $100,000 fixed-rate 30

A bank issues a $100,000 fixed-rate 30-year mortgage with a nominal annual rate of 4.5%. If the required rate drops to 4.0% immediately after the mortgage is issued, what is the impact on the value of...

Q: A banker commits to a two-year $5,000

A banker commits to a two-year $5,000,000 commercial loan and expects to fulfill the agreement in 30 days. The interest rate will be determined at that time. Currently, rates are 7.5% for such loans....

Q: A trust manager for a $100,000,000 stock

A trust manager for a $100,000,000 stock portfolio wants to minimize short-term downside risk using Dow put options. The options expire in 60 days, have a strike price of 9,700, and a premium of $50....

Q: The president of the United States announces in a press conference that

The president of the United States announces in a press conference that he will fight the higher inflation rate with a new anti-inflation program. Predict what will happen to interest rates if the pub...

Q: North-Northwest Bank (NNWB) has a differential advantage in

North-Northwest Bank (NNWB) has a differential advantage in issuing variable-rate mortgages but does not want the interest income risk associated with such loans. The bank currently has a portfolio of...

Q: If at the expiration date, the deliverable Treasury bond is selling

If at the expiration date, the deliverable Treasury bond is selling for 101 but the Treasury bond futures contract is selling for 102, what will happen to the futures price? Explain your answer.