Bank of Charub ($ million) Assets: Liabilities and Net Worth: 270 day US Treasury bills $500m 1 year Certificates of Deposit $550m 2 year consumer loans Demand Deposits $750m Fixed rate, 12% p.a. annually $275m 2 year Bonds $175m 7 year commercial loans $350m Fixed rate, 7.5% p.a. annually Fixed rate, 9% p.a. annually Overnight Fed Funds $350m 10 year fixed rate mortgages $675m Fixed rate, 6.5% p.a. monthly 10 year floating rate mortgages $125m Equity $100m LIBOR+50bp, monthly roll date Notes: The 1 year Certificates of Deposit pay 1.95% p.a. annually. The demand deposits are non-interest bearing and have a duration of zero. The 7 year commercial loans have a duration of 4.75 years. The fixed rate mortgages have a duration of 8.3 years. All values are market values. 5. What is the convexity of the 2 year consumer loans if they yield 6% p.a. with a coupon rate of 12% p.a. paid annually? a. 4.98 b. 2.83 c. 3.85 d. 1.95 e. 2.01
Bank of Charub ($ million)
Assets: Liabilities and Net Worth:
270 day US Treasury bills $500m 1 year Certificates of Deposit $550m
2 year consumer loans Demand Deposits $750m
Fixed rate, 12% p.a. annually $275m 2 year Bonds $175m
7 year commercial loans $350m Fixed rate, 7.5% p.a. annually
Fixed rate, 9% p.a. annually Overnight Fed Funds $350m
10 year fixed rate mortgages $675m
Fixed rate, 6.5% p.a. monthly
10 year floating rate mortgages $125m Equity $100m
LIBOR+50bp, monthly roll date
Notes: The 1 year Certificates of Deposit pay 1.95% p.a. annually. The demand deposits
are non-interest bearing and have a duration of zero. The 7 year commercial loans have a
duration of 4.75 years. The fixed rate mortgages have a duration of 8.3 years. All values
are market values.
5. What is the convexity of the 2 year consumer loans if they yield 6% p.a. with
a coupon rate of 12% p.a. paid annually?
a. 4.98
b. 2.83
c. 3.85
d. 1.95
e. 2.01
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
