Blue Steel Community has the following market value balance sheet:
Assets/Liability Market value(in $ millions) Duration (in years)
Federal Funds Deposit $31 0
Accounts Receicables 630 .20
Short-terms Loans 390 .65
Long-term Loans 98 5.25
Mortgages 346 12.85
Checking and savings deposits 585 0
Certificates of deposit 310 1.60
Long-term Financing 305 9.80
Equity 295 N/A
a. What is the duration of the assets?
b. What is the duration of the liabilities?
c. Is the bank immune to interest rate risk?
The solution finds out duration of the assets, duration of the liabilities, and bank immune to interest rate risk.