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Question
The following is an FI's balance sheet ($millions).
Notes to Balance Sheet:
Munis are 2-year 6 percent annual coupon municipal notes selling at par. Loans are floating rates, repriced quarterly. Spot discount yields for 91-day Treasury bills are 3.75 percent. CDs are 1-year pure discount certificates of deposit paying 4.75 percent.
What is the duration of the municipal notes (the value of x)?
A. 1.94 years.
B. 2.00 years.
C. 1.00 years.
D. 1.81 years.
E. 0.97 years.
Answer
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