a) What are x and y? b) What are the cumulative repricing gaps for 1 month (CGAP1-month), 3 months (CGAP3-month), 1-year (CGAP1-year), and 2 years (CGAP2year)? c) What is the impact over the next three months on the net interest income if interest rate on RSAS and RSLS both increase by 40 basis points (i.e. +0.4%)?
a) What are x and y? b) What are the cumulative repricing gaps for 1 month (CGAP1-month), 3 months (CGAP3-month), 1-year (CGAP1-year), and 2 years (CGAP2year)? c) What is the impact over the next three months on the net interest income if interest rate on RSAS and RSLS both increase by 40 basis points (i.e. +0.4%)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:(Repricing gaps) Consider a financial institution with the following Balance
Sheet (amounts are in million; market yields are in parenthesis)
Assets
Liability and Equity
1-month commercial papers
Cash
1-month T-bills (5.05%)
3-month T-bills (5.25%)
6-month T-bills (5.50%)
2-year T-notes (5.85%)
8-year T-notes (6.95%)
20-year mortgage (floating rate,
rate reset every 6 months)
Total Assets
$70
$440
250 7-year debt, fixed rate (6.55%)
150 1-year CDs
300
100
150
100
100
50 Equity
$870 Total Liability and Equity
$y
(a) What are x and y?
(b) What are the cumulative repricing gaps for 1 month (CGAP1-month), 3
months (CGAP3-month), 1-year (CGAP1-year), and 2 years (CGAP2-year)?
(c) What is the impact over the next three months on the net interest income
if interest rate on RSAS and RSLS both increase by 40 basis points (i.e.
+0.4%)?
(d) What is the impact over the next two years on the net interest income
if interest rate on RSAS increases by 50 basis points and interest rate on
RSLS increases by 30 basis points?
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