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    Calculating Duration and Market to Book Value Ratios

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    I need help with these two questions:
    1.A bank has three assets. It has $65 million invested in consumer loans with a 6 month duration, $26 million invested in T-Bonds with a 12 year duration and $39 million in 1 year maturity T-Bills. What is the duration of the bank's asset portfolio?

    2. A bank has book value of assets equal to $900 million and market value of assets equal to $1,100 million. The bank has book value of liabilities of $700 million and market value of liabilities equal to $800 million. The bank's market to book ratio is?

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    Solution Preview

    1.Duration of consumer loans=D1=6 months=0.5 years
    Duration of T-bonds =D2=12 years
    Duration of T-bills =D3=1 year

    Investment in consumer loans=M1=$65 million
    Investment in ...

    Solution Summary

    This solution address both questions with step-by-step explanations with workings shown, the response to the first problem depicts the steps to find out the duration of asset portfolio. and the second response determines the market to book ratio in the given case.