Bank Portfolio Simulation Worksheet - Round 1 Version 2.0 Initial Bank Portfolio - Round 1 You are asked to allocate $1,000,000 of initial equity capital among alternative liquid investments: cash, one- year Treasury bills, 5-year Treasury notes, and 15-year Treasury bonds. Your goal is to maximize return and minimize risk in this start-up phase until you are able to generate riskier assets, such as loans, and leverage your initial equity with debt. 1. Based on the possible outcomes you face, allocate your initial equity of $1,000,000 among the asset possibilities provided in the initial balance sheet below!: Balance Sheet t=1: Start of Round 1 Assets Liabilities & Equity Cash Total Liabilities $ 1 yr US Treasury Bill 5yr US Treasury Note 15yr US Treasury Bond Common Stock $ 1,000,000 Ret Earnings $ Total Equity $ 1,000,000 Total Assets $ Total L&E $ 1,000,000 2.) In the space below provide the rationale (minimum of 90 words, single spaced, partial credit for less) for your initial allocation of risk capital of $1,000,000. Include in your assessment the risks associated with US Treasury securities as described in Chapter 6 in the sections on default risk, inflation risk, and interest rate risk.
Bank Portfolio Simulation Worksheet - Round 1 Version 2.0 Initial Bank Portfolio - Round 1 You are asked to allocate $1,000,000 of initial equity capital among alternative liquid investments: cash, one- year Treasury bills, 5-year Treasury notes, and 15-year Treasury bonds. Your goal is to maximize return and minimize risk in this start-up phase until you are able to generate riskier assets, such as loans, and leverage your initial equity with debt. 1. Based on the possible outcomes you face, allocate your initial equity of $1,000,000 among the asset possibilities provided in the initial balance sheet below!: Balance Sheet t=1: Start of Round 1 Assets Liabilities & Equity Cash Total Liabilities $ 1 yr US Treasury Bill 5yr US Treasury Note 15yr US Treasury Bond Common Stock $ 1,000,000 Ret Earnings $ Total Equity $ 1,000,000 Total Assets $ Total L&E $ 1,000,000 2.) In the space below provide the rationale (minimum of 90 words, single spaced, partial credit for less) for your initial allocation of risk capital of $1,000,000. Include in your assessment the risks associated with US Treasury securities as described in Chapter 6 in the sections on default risk, inflation risk, and interest rate risk.
Chapter1: Introduction To Finance For Entrepreneurs
Section: Chapter Questions
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Transcribed Image Text:Bank Portfolio Simulation Worksheet - Round 1
Version 2.0
Initial Bank Portfolio - Round 1
You are asked to allocate $1,000,000 of initial equity capital among alternative liquid investments: cash, one-
year Treasury bills, 5-year Treasury notes, and 15-year Treasury bonds. Your goal is to maximize return and
minimize risk in this start-up phase until you are able to generate riskier assets, such as loans, and leverage your
initial equity with debt.
1. Based on the possible outcomes you face, allocate your initial equity of $1,000,000 among the asset
possibilities provided in the initial balance sheet below!:
Balance Sheet t=1: Start of Round 1
Assets
Liabilities & Equity
Cash
Total Liabilities
$
1 yr US Treasury Bill
5yr US Treasury Note
15yr US Treasury Bond
Common Stock
$
1,000,000
Ret Earnings
$
Total Equity
$
1,000,000
Total Assets
$
Total L&E
$
1,000,000
2.) In the space below provide the rationale (minimum of 90 words, single spaced, partial credit for less) for
your initial allocation of risk capital of $1,000,000. Include in your assessment the risks associated with US
Treasury securities as described in Chapter 6 in the sections on default risk, inflation risk, and interest rate risk.
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