The Average Duration of the Loans Is 10 Years

Multiple Choice

The average duration of the loans is 10 years. The average duration of the deposits is 3 years. What is the gain or loss on the futures position using T-Bonds (Duration = 9 years, $96 per $100 face value) if the shock to interest rates is 1 percent [i.e. ΔR/(1 + R) = 0.01 and ΔR_f/(1 + R_f) = 0.011]?

A) $16,320,960 loss.
B) $16,312,320 gain.
C) $15,552,750 gain.
D) $15,552,750 loss.
E) $13,252,250 gain.