Consider the following simple bank balance sheet; S million Liabilities and equity Demand deposits Savings accounts 3-month CDs 6-month CDs 2-year CDs Interbank borrowings Overnight repos S million 250 20 360 350 425 225 260 Assets Cash Interbank lending 3-month T-notes 2-year T-bonds 20 150 360 100 5-year corporate bonds (floating rate) (repriced @six months) 2-year commercial loans (floating rate) (repriced @ six months) 15-year variable rate mortgages (repriced annually) 500 475 350 30-year fixed-rate mortgages (repriced monthly) 375 Premises and equipment 60 Subordinated debt: 7 year fixed rate Equity 100 400 Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding funds. The bank's risk manager is considering the impact of interest rate changes for a six month planning period. If interest rates on rate sensitive assets increase 50 basis points and on rate sensitive liabilities the increase is 30 basis points, then the change in net interest income is $ the figures in the table are in millions) (give your answer in dollars, without the $ sign, and note that
Consider the following simple bank balance sheet; S million Liabilities and equity Demand deposits Savings accounts 3-month CDs 6-month CDs 2-year CDs Interbank borrowings Overnight repos S million 250 20 360 350 425 225 260 Assets Cash Interbank lending 3-month T-notes 2-year T-bonds 20 150 360 100 5-year corporate bonds (floating rate) (repriced @six months) 2-year commercial loans (floating rate) (repriced @ six months) 15-year variable rate mortgages (repriced annually) 500 475 350 30-year fixed-rate mortgages (repriced monthly) 375 Premises and equipment 60 Subordinated debt: 7 year fixed rate Equity 100 400 Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding funds. The bank's risk manager is considering the impact of interest rate changes for a six month planning period. If interest rates on rate sensitive assets increase 50 basis points and on rate sensitive liabilities the increase is 30 basis points, then the change in net interest income is $ the figures in the table are in millions) (give your answer in dollars, without the $ sign, and note that
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:Consider the following simple bank balance sheet;
S million
Liabilities and equity
Demand deposits
Savings accounts
3-month CDs
6-month CDs
2-year CDs
Interbank borrowings
Overnight repos
S million
250
20
360
350
425
225
260
Assets
Cash
Interbank lending
3-month T-notes
2-year T-bonds
20
150
360
100
5-year corporate bonds (floating rate) (repriced @six months)
2-year commercial loans (floating rate) (repriced @ six months)
15-year variable rate mortgages (repriced annually)
500
475
350
30-year fixed-rate mortgages (repriced monthly)
375
Premises and equipment
60
Subordinated debt: 7 year fixed rate
Equity
100
400
Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding
funds.
The bank's risk manager is considering the impact of interest rate changes for a six month planning period.
If interest rates on rate sensitive assets increase 50 basis points and on rate sensitive liabilities the increase is 30 basis points, then the change in net interest income is $
the figures in the table are in millions)
(give your answer in dollars, without the $ sign, and note that
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