Use the following information to answer the question(s) below. You are a risk ma

Question

Use the following information to answer the question(s) below. You are a risk manager for Security First Trust Savings and Loan (SFTSL). SFTSL's balance sheet is as follows (in millions of dollars): The duration of the auto loans is three years and the duration of the mortgages is eight years. Both cash reserves and checking and savings have zero duration. The CDs have a duration of two years and the long-term financing has a ten year duration. The duration of SFTSL's equity is closest to: 10 years 14 years 6 years 8 years If interest rates are currently 5%, but fall to 4%, your estimate of the approximate change in SFTSL equity is closest to: 8% decrease 8% increase 12% decrease 14% increase

Explanation / Answer

1.The duration of SFTSL’s equity is closest to 8 years.

2.If interest rate fall ,the assets and liabilities will also fall proportionately.

There will be decrease of 8 %.

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