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What is the duration of the bank existing loans

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Reference no: EM132658740

A bank wants to use direct refinancing to manage its duration gap, DG. Currently, for its assets, Loans = $22 million and Cash = $6 million. Equity = $4 million. Average DA = 2.75 yrs, and average DL = 4 yrs.

1 Should the bank buy loans with cash or sell existing loans for cash to reduce its interest rate risk?

2 What is the duration of the bank's existing loans?

3 How much cash will be used to eliminate the bank's interest rate exposure, if the loan available on the market has a duration of 7.6 years?

Reference no: EM132658740

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