Eagle Bank has the following interest-sensitive assets and interest-sensitive liabilities. Amount maturing in 30 days (million) Amount maturing in 30 days (million) 810 570 63 330 116 Interest-sensitive assets Loans Securities 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.

Eagle Bank has the following interest-sensitive assets and interest-sensitive liabilities. Amount maturing in 30 days (million) Amount maturing in 30 days (million) 810 570 63 330 116 Interest-sensitive assets Loans Securities 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.

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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. Which of the following bank accounts has the highest effective annual return? An account that pays 6% nominal interest with annual compounding. An account that pays 5% nominal interest with monthly compounding. An account that pays 6% nominal interest with daily (365-day) compounding. An account that pays 6% nominal interest with monthly compounding. An account that pays 5% nominal interest with daily (365-day) compounding.
A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 16-year duration, and $39 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? Group of answer choices 11.51 years 7.38 years 3.95 years 5.68 years
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. Bank A Cash Reserves for Deposit ? Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 If Cash Reserves for deposit is at least 8% of the deposit under the Basel Accord, how much of the G-Bond Bank A should purchase? $17 $14 $16 $18 $20 $15 $19 $21
Suppose the Royal Bank of Pullman has the following assets: cash = 100 (with modified duration of 0) and a 10-year loan worth $900 (with modified duration of 9). Its liabilities are a CD worth $800 (with a modified duration of 2). If interest rates rise by 1% the bank's equity will fall by ________ %. A. 9 B. 5.6 C. 2 D. 6.5
Suppose a bank has the following Balance Sheet Assets Liabilities RSA = 120 RSL = 90 FRL = X FRA = 110 (Fixed rate liabilities can be found if needed by determining what number it must be to balance the balance sheet.) Suppose all the Assets and Liabilities were set last year when the interest rate was 10, if the interest rate has changed by 2% since that time what is the current cost from all of the bank's liabilities? Your Answer:
On its savings accounts, the First National Bank offers a 5 percent nominal interest rate that is compounded monthly. Savings accounts at the Second National Bank have the same effective annual return, but interest is compounded quarterly. What nominal rate does the Second National Bank offer on its savings accounts? a. 5.12% b. 5.00% c. 5.02% d. 1.28% e. 5.22%
= A bank features a savings account that has an annual percentage rate of r interest compounded quarterly. Tatiana deposits $9,000 into the account. The account balance can be modeled by the exponential formula A(t) = a (1 + 7-)kt, where A is account value after t years, a is the principal (starting amount), r is the annual percentage rate, k is the number of times each year that the interest is compounded. (A) What values should be used for a, r, and k? a = r = 5.6% with k = (B) How much money will Tatiana have in the account in 7 years? Answer = $ 7. Round answer to the nearest penny. APY = = %. Round answer to 3 decimal places. (C) What is the annual percentage yield (APY) for the savings account? (The APY is the actual or effective annual percentage rate which includes all compounding in the year).
A bank features a savings account that has an annual percentage rate of r = 5.1% with interest compounded quarterly. Kimberly deposits $12,000 into the account. The account balance can be modeled by the exponential formula A(t) = a(1+ r kt where A is account value after t years , a is the principal (starting amount), r is the annual percentage rate, k is the number of times each year that the interest is compounded. (A) What values should be used for a, r, and k? k = = D (B) How much money will Kimberly have in the account in 10 years? Amount = $ Round answer to the nearest penny. (C) What is the annual percentage yield (APY) for the savings account? (The APY is the actual or effective annual percentage rate which includes all compounding in the year). АРY Round answer to 3 decimal places.
Assume a bank only has 10 days of liquidity in the base case scenario (i.e./ positive net cash flow) but it needs to push it out to 15 days to be compliant with an upcoming policy change. What action would it need to take in order to become compliant with the policy change? Issue 30-day debt and invest the proceeds in a 30-day asset Issue 30-day debt and invest the proceeds in an overnight asset Issue an overnight liability and invest the proceeds in a 30-day asset Issue an overnight liability and invest in an overnight asset
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

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