BankBoston Balance Sheet Assets Liabilities Cash 30 Core Deposits 20 Federal Funds (8.5%, .36) 20 Federal...

BankBoston Balance Sheet

Assets		Liabilities
Cash	30	Core Deposits	20
Federal Funds (8.5%, .36)	20	Federal Funds (8.5%, .401)	50
Loans (Fixed) (12%, x)	105	Euro CDs (9%, .401)	130
Loans Floating (Libor +4%, .36)	65	Equity	20
Total Assets	220	Total Liabilities and Equity	220

Notes: Libor is 11%. Fixed rate loans have five-year maturities, and are priced at par, principal is repaid at maturity.

What is the duration of the fixed rate loans?

What is the duration of BankBoston’s assets?

What is the duration of BankBoston’s liabilities?

What is the duration gap?

What is the impact on net worth if interest rates rise by 1%?

What is the impact on net worth if interest rates fall by .75%?

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