Bank goal of immunizing net worth against interest rate risk

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Reference no: EM131924053

A bank has $140 million in assets, $120 million in liabilities and $20 million in shareholders' equity. The bank’s liabilities are mainly deposits, and these have an estimated duration of 1.3. The bank is concerned about interest rate risk and wants to immunize its net worth (i.e. shareholder’s equity) against the impact of changes in the interest rate. The bank's assets are mostly loans and bonds. What duration of bank assets is required to achieve the bank’s goal of immunizing its net worth against interest rate risk?

Reference no: EM131924053

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