Formosa Independence Bank has D_A = 2.45 years and D_L = 1.08 years. In addition, this bank has total assets of $375 million and liabilities of $337.5 million. The CFO of Formosa Independence Bank wishes to effectively reduce the duration gap to one year by hedging with T-Bond futures that have a market value of $115,000 and a D_Fut = 8 years. How many contracts are needed and should the bank buy or sell them? If D stands for duration.

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The Answer of Formosa Independence Bank has D_A = 2.45 years and D_L = 1.08 years. In addition, this bank has total assets of $375 million and liabilities of $337.5 million. The CFO of Formosa Independence Bank wishes to effectively reduce the duration gap to one year by hedging with T-Bond futures that have a market value of $115,000 and a D_Fut = 8 years. How many contracts are needed and should the bank buy or sell them? If D stands for duration.

Formosa Independence Bank Has DA = 2

Formosa Independence Bank Has D_A = 2