QUESTION 3 a. The market values of liabilities and assets are RM115 and RM125, respectively for OFFSHORE bank. The average duration of this bank's assets is 1.55, whereas liability's duration is 0.90. Calculate the duration gap for OFFSHORE bank. b. Based on the calculation of duration gap in the previous questions (i.e., a), what is the change in the market value of net worth as a percentage of assets if interest rates rise from 9% to 11%. c. If DEFI involves in interest-rate forward contracts with GUMTREE, how do you complete this contract to hedge interest rate risk? The value of the contract is RM2 million in face value and offers 4.5% coupon rate. The treasury bond (i.e. financial instrument) has maturity until 2035.

QUESTION 3 a. The market values of liabilities and assets are RM115 and RM125, respectively for OFFSHORE bank. The average duration of this bank's assets is 1.55, whereas liability's duration is 0.90. Calculate the duration gap for OFFSHORE bank. b. Based on the calculation of duration gap in the previous questions (i.e., a), what is the change in the market value of net worth as a percentage of assets if interest rates rise from 9% to 11%. c. If DEFI involves in interest-rate forward contracts with GUMTREE, how do you complete this contract to hedge interest rate risk? The value of the contract is RM2 million in face value and offers 4.5% coupon rate. The treasury bond (i.e. financial instrument) has maturity until 2035.

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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Similar questions

LO 10-5 Corporation E10-10 Calculating and Interpreting the Debt-to-Assets Ratio and Times Interest Earned Ratio At May 31, 2019, FedEx Corporation reported the following amounts (in millions) in its financial statements: Total Assets Total Liabilities Interest Expense Income Tax Expense Net Income game Tot 1500 2019 $54,400 36,600 ainuoms 21000056 590 115 540 2018 $52,330 32,900 560 220 4,570
2) Which of the following statements is INCORRECT based on the time value of money? A) In general, money today is worth more than money in one year. B) We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. C) We refer to (1-r) as the interest rate factor for risk-free cash flows. D) For most financial decisions, costs and benefits occur at different points in time.
Liability management increases a bank's _________ risk and _________ risk.A. interest rate; priceB. liquidity; financialC. interest rate; financialD. price; interest rate
4. Gap and Duration Analysis Take the following balance sheet, which of the assets and labilities are rate-sensitive? Which assets and liabilities are not? a. Assets Value Liabilities Value Checkable Deposits Savings Deposits Money Market Accounts 40 Long-Term Loans Long-Term Securities 75 26 100 Reserves 54 10 Variable Rate CDs 25 Short-Term Securities Variable-rate Loans 15 30 Long-Term CDs 25 b. What is the estimated rate of change of bank profit, in terms of next year's interest rate, conditional on this year's interest rate being 2%? c. Suppose that all the long-term securities that the bank holds mature in 4 years and their interest rate will be 5% in that year. What is the approximate market-value of these long-term securities in 4 years given this year's interest rate is 2%?
Choose the correct letter of answer: Company D's current assets and current liabilities are P200,000.00 and P140,000.00 respectively. How much additional funds can it borrow from banks for short term, without reducing the current ratio below 1.33? a. P13,800.00b. P86,200.00c. P52,612.00d. P35,870.00e. P41,818.00
2- Which of the following ratios would be most useful in determining a company's ability to cover its'interest payments? A. ROA. B Fixed charge coverage. C. Total asset turnover.
6
Item 4 of 25 The Chief Finance Officer of Kulit Company follows the policy of matching the maturity of assets with the maturity of financing. The implications of this policy include all of the following except Select the correct response: the seasonal expansion of cash, receivable and inventory should be financed by short-term debt. O long-term assets like plant and equipment should be financed with long-term debt or equity. O cash, receivable and inventory should be financed with long-term debt or equity the minimum level of cash, receivable and inventory required to stay in business can be considered permanent and financed with long-term debt or equity
A)What is the amount of RSA, RSL and the income gap amount? B) Calculate the duration gap. C)What is the change in this bank’s net income if the interest rises by 1%, does it go up or does it go down? Show work D) What happens when the interest rises by 1% to this bank’s asset value, liability value and the net worth in dollar amounts? Show work.
2.-In compound interest calculations, the interest rate applied can be known from the initial and final value of a deposit, and the time it was deposited. true or false?
QUESTION 8 The appropriate collateral for a secured short-term loan is ... fixed assets. work-in-progress inventory. raw materials, inventory and receivables. ordinary stock in privately held corporations.
Question 12 Which of the following methods does not adjust for the time value of money: A internal rate of return B net present value C profitability index D payback period

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