Key wesr bank has been making a high volume 150m of 30 year, Financial Management

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Key wesr bank has been making a high volume 150m of 30 year

Key Wesr bank has been making a high volume (150m) of 30 year fixed rate mortgage loans at 4%. The bank is worried about rising rates and the impact on the net incoe and net worth of the bank. If rates rise 100 basis points how much interest income will they lose on the loans and if they enter into hedge to reduce this risk what type of hedge strategy might the bank utilize to manage this risk?

A. 1.5m, Receive Fixed/Pay Float Swap

B. 8.25m, Long Futures Hedge

C. 6m, Short Futures Hedge

D. 1.5m, Receive Float/ Pay Fixed Swap

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Financial Management: Key wesr bank has been making a high volume 150m of 30 year

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Financial Management: Key wesr bank has been making a high volume 150m of 30 year

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