Eastern Bank Investments has the following assets and liabilities on its balance sheet. The two-year Treasury notes are zero coupon assets. Interest payments on all other assets and liabilities occur at maturity. Assume 360 days in a year.
Assets: Liabilities:
$300 million 30-day Treasury bills $1,150 million 14-day repos
$550 million 90-day Treasury bills $560 million 1-year commercial paper
$700 million 2-year Treasury notes Equity: $180 million 180-day municipal notes
$20 million equity
Required:
a. What is the duration of the assets?
b. What is the duration of the liabilities?
c. What is the leverage-adjusted duration gap?
Answers: 3
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Eastern Bank Investments has the following assets and liabilities on its balance sheet. The two-year...
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