) Based on the table below, calculate the duration gap for the bank. (b) Estimate the change in equity in absolute and percentage terms if interest rates move from their current level of 4% up to 5.25%. Instrument Value Duration Cash 70 0 ARM Mortgages 300 0.15 Fixed Rate Mortgages 200 20 Investments in Securities 100 10 Total Assets 570 Deposits 400 0 Loans from other Banks 100 6 Equity 70 ? Total Liabilities and Equity 570

) Based on the table below, calculate the duration gap for the bank. (b) Estimate the change in equity in absolute and percentage terms if interest rates move from their current level of 4% up to 5.25%. Instrument Value Duration Cash 70 0 ARM Mortgages 300 0.15 Fixed Rate Mortgages 200 20 Investments in Securities 100 10 Total Assets 570 Deposits 400 0 Loans from other Banks 100 6 Equity 70 ? Total Liabilities and Equity 570

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 2EP

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Use the following to answer questions 3-4: Use balance sheet available for an FI (all in market values). Consumer loans $150 m Liabilities $300 m Commercial Loans $250 m Equity $100 m Total Assets $400 m Total Liabilities & Equity $400 m The average duration of the loans is 8 years. The average duration of the liabilities is 2 years. 3. What is the duration gap of the bank's portfolio? A. 10 years B. 6.3 years C. 6.5 years D. 7.98 years E. 8.0 years 4. What is the change in the value of the FI's equity for a 1 percent increase in interest rates from the current rates of 0.07 (1.e., 7 percent)? Assume flat term structure, and parallel shifts in yield curves. Use the duration concept. A. $17.30987 m B. $19.51818 m C. -S 22.59093 m D. -$23.11114 m E. - $24.29906 m
Eagle Bank has the following interest-sensitive assets and interest-sensitive liabilities. Amount maturing in Amount maturing in 30 days (million) 570 330 116 Interest-sensitive assets Loans Securities 30 days (million) 810 63 Interest rate on interest-sensitive assets is 5% Interest rate on interest-sensitive liabilities is 3% Interest-sensitive liabilities Savings deposits Time deposits Money market The interest rate is expected to rise 1% (for both interest-sensitive assets and liabilities) 30 days later. Will Eagle Bank benefit from the interest rate rise? Explain your answer. Show your calculations.
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If a bank has quarterly deposit interest expense of $1MM, an average deposit portfolio of $3.2Bn and it is 50% non-interest bearing and 50% interest bearing, what is the bank's Interest Bearing Deposit cost?
Consider the following balance sheet for Whiz Financial Services Limited: Assets K Liabilities K Cash 6.25 Equity 25.00 Short term consumer loans (1 yr maturity)62.50 Demand deposits 50.00 Long term consumer loans (2 yr maturity)31.25 Client Savings accounts 37.50 3 month T-Bills 37.50 3 month CDs 50.00 6 month T-Bills 43.75 3 months Bankers Acceptances 25.00 3 year T-Bonds 75.00 6 month commercial paper 75.00 10 year, fixed rate mortgages 25.00…
Consider the following balance sheet for Whiz Financial Services Limited: Assets K Liabilities K Cash 6.25 Equity 25.00 Short term consumer loans (1 yr maturity) 62.50 Demand deposits 50.00 Long term consumer loans (2 yr maturity) 31.25 31.25 Client Savings accounts 37.50 3 month T-Bills 37.50 3 month CDs 50.00 6 month T-Bills 43.75 3 months Bankers Acceptances 25.00 3 year T-Bonds 75.00 6 month commercial paper 75.00 10 year, fixed rate mortgages 25.00 1 year time deposits 25.00 30- year floating rate mortgages 50.00 2-year time deposits 50.00 premises 6.25 - Total 337.50 337.50 Required:A. Calculate the value of the rate sensitive assets, rate sensitive liabilities and therepricing gap over the next year. B. Calculate the expected change in the net interest income for the bank if interestrates rise by 1 percent on both rate sensitive…
No tables, ONLY formulas, please, correct answers; (i) ?′ = 0.050622??, (ii) ?^(12) = 0.048892??
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The rates offered by a bank on deposits between $10,000 and $24,999 are shown in the following table: Term 180 to 269 days 270 to 364 days Rate. 3.15% 3.45% How much more will an investor earn from a $10,000 investment in a 364-day GIC than from two consecutive 182-day GICS? Assume that the interest rate on 180- to 269-day GICS will be the same on the renewal date as it is today. Remember that both the principal and the interest from the first 182-day GIC can be invested in the second 182-day GIC. (Use 365 days a year. Do not round the intermediate calculations. Round your final answer to 2 decimal places.) An investor will earn $ more
Suppose that Big Bucks Bank has the simplified balance sheet shown below. The reserve ratio is 20 percent. Assets Liabilities and net worth (2) (1) (2) Reserves $ 26,000 38,000 36,000 Checkable deposits $ 100,000 Securities Loans Instructions: Enter your answers as a whole number. a. What is the maximum amount of new loans that Big Bucks Bank can make? 2$ Using the table above, show in columns 1 and 1' how the bank's balance sheet will appear after the bank has lent this additiona amount by inserting the new values into the gray shaded cells of the given table. b. By how much has the money supply changed?
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The following information is for AmBank. The ECR reflects the relationship of each account's rate to the prime rate. Rate Sensitive Assets 1-year Balance Sheet GAP ECR Loans $55,120,000 82% Securities $28,615,000 67% Rate Sensitive Liabilities MMDAS $41,640,000 34% NOWS $37,260,000 90% CDs >= $100,000 $20,975,000 85% Using this information, how much will NII change if the prime rate rises 1%?

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Instrument	Value	Duration

Cash	70	0
ARM Mortgages	300	0.15
Fixed Rate Mortgages	200	20
Investments in Securities	100	10

Total Assets	570


Deposits	400	0
Loans from other Banks	100	6
Equity	70	?

Total Liabilities and Equity	570