You have been hired as a risk manager for Acorn Savings and Loa. Currently, Acorn’s balance sheet is as follows (in millions of dollars):
You have been hired as a risk manager for Acorn Savings and Loa. Currently, Acorn’s balance sheet is as follows (in millions of dollars):
Assets Liabilities
Cash reserves 51.2 Checking and savings 78.7
Auto loans 95.3 Certificates of deposit 101.5
Mortgages 150.1 Long-term financing 98.3
Total Assets 296.6 Total liabilities 278.5
Owner’s equity 18.1
Total liabilities and equity 296.6
a. What is the duration of Acorn’s equity?
The duration of the assets is ___ years. (Round to two decimal places.)
The duration of the liabilities is _____ years. (Round to two decimal places.)
The duration of the equity is ____ years. (Round to two decimal places.)
b. Suppose Acorn experiences a rash of mortgage prepayments, reducing the size of the mortgage portfolio from $ 150.1
