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
Related questions
Question
![The following table contains balance sheet information for Dual bank. All
assets and liabilities are currently priced at par.
Assets
Commercial bills
T-notes
T-bonds
Loans
Amount (Smillion) Duration
900
400
(?)
700
Liabilities
0.5 Deposits
0.9 Federal Funds
2
0.7
Amount (Smillion) Duration
500
500
2
If the financial institution has instead invested $400 million on the T-
bonds, what would be the impact on the firms' market value of equity if
the entire yield curve shifts upward by 30 basis points [i.e., DR/(1+R) =
0.0030]?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9166732d-1b70-4961-ab33-117002c95a21%2F96ea947b-aaaa-4050-a4b3-3ee1b389cae4%2Fx39ldql_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following table contains balance sheet information for Dual bank. All
assets and liabilities are currently priced at par.
Assets
Commercial bills
T-notes
T-bonds
Loans
Amount (Smillion) Duration
900
400
(?)
700
Liabilities
0.5 Deposits
0.9 Federal Funds
2
0.7
Amount (Smillion) Duration
500
500
2
If the financial institution has instead invested $400 million on the T-
bonds, what would be the impact on the firms' market value of equity if
the entire yield curve shifts upward by 30 basis points [i.e., DR/(1+R) =
0.0030]?
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