The following financial statement is for the current year. From the past, you know that 10% of fixed- rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities ¢ 1,500,000 € 15,000,000 C 5,500,000 C 8,000,000 Reserves Checkable Deposits Securities Money Market Deposits Savings Accounts <1 Year 1 to 2 Years ¢ 6,000,000 C 8,000,000 C 12,000,000 CDs € 15,000,000 € 22,000,000 >2 years Variables-rate Residential Mortgages <1 Year C 7,000,000 ¢ 13,000,000 I to 2 Years > 2 years € 5,000,000 ¢ 2,500,000 € 5,000,000 Variables-rate Fixed-rate Commercial Loans Fed Funds C 1,500,000 € 18,500,000 € 30,000,000 ¢ 2,500,000 <1 Year I to 2 Years Borrowings <1 Year I to 2 Years C 12,000,000 ¢ 3,000,000 ¢ 2,000,000 ¢ 5,000,000 >2 years >2 years Bank Capital Buildings, etc. Total C100,000,000 Total C100,000,000 a. What is the current Income GAP for Second National Bank? What will happen to the bank’s current net interest income if rates fall by 75 basis points? b. What special assumptions do income and duration gap analyses make about interest rate changes

The following financial statement is for the current year. From the past, you know that 10% of fixed- rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities ¢ 1,500,000 € 15,000,000 C 5,500,000 C 8,000,000 Reserves Checkable Deposits Securities Money Market Deposits Savings Accounts <1 Year 1 to 2 Years ¢ 6,000,000 C 8,000,000 C 12,000,000 CDs € 15,000,000 € 22,000,000 >2 years Variables-rate Residential Mortgages <1 Year C 7,000,000 ¢ 13,000,000 I to 2 Years > 2 years € 5,000,000 ¢ 2,500,000 € 5,000,000 Variables-rate Fixed-rate Commercial Loans Fed Funds C 1,500,000 € 18,500,000 € 30,000,000 ¢ 2,500,000 <1 Year I to 2 Years Borrowings <1 Year I to 2 Years C 12,000,000 ¢ 3,000,000 ¢ 2,000,000 ¢ 5,000,000 >2 years >2 years Bank Capital Buildings, etc. Total C100,000,000 Total C100,000,000 a. What is the current Income GAP for Second National Bank? What will happen to the bank’s current net interest income if rates fall by 75 basis points? b. What special assumptions do income and duration gap analyses make about interest rate changes

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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What annual interest rate do you need to find in order for a deposit of $500 to grow to $1,685 in 13 years if the bank compounds interest weekly? Select one: O a. 8.89 percent O b. 8.42 percent O c. 7.95 percent O d. 9.35 percent 0 e. 9.80 percent
A bank offers a fixed term deposit investment account with an interest rate of 6.5% per annum compounding quarterly how do I work out what the equivalent effective interest rate is
(1)
Plz explain in detail asap..tysm
. 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.
Bank 1 is offering interest rate of 8.4% (compounds semiannually) on fixed deposits. Beck 2 is offering interest rate of 8.3% (compounds monthly) on fixed deposits. An investor invested amount of $15,000 for five years in the bank that is offering highest effective annual rate. What is the accumulated amount at the end of five years? a $22,683 b. $22.634 c. $22.451 d $22.982
A bank deposit paying simple interest at the rate of 6%/year grew to $1300 in 8 months. Find the principal. (Round your answer to the nearest cent.) $
First American Bank charges 10.8 percent compounded monthly on its business loans. First Fifth Bank charges 11 percent compounded semiannually. Calculate the EAR for each bank. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) f3 First National Bank First United Bank % % As a potential borrower, which bank would you go to for a new loan? ** f4 f5 f6 Search ムー 17 4+ First National Bank hp f8 fg f10 144 DII DDI f11
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%
Assume a bank has the following (very simplified) balance sheet. 1)Assets Mortgages Fixed rate, 15 year, annual payments, both the coupon rate and yield-to-maturity are 8% Floating rate, 15 year, rate: LIBOR + 2%, (duration = 0) 2)Liabilities Overnight deposits, rate: 0.6%, (duration = 0) 2 year CD, rate: 2%, assume it is a zero coupon 3 year CD, rate: 4%, assume it is a zero coupon 3) Assignment: Calculate weights which will immunize the portfolio. Note this is a set of weights, there is not one unique solution. You don't have to calculate the full set, just some set of weights which immunizes the portfolio. Now say you can only invest 50% of your assets in floating rate mortgages. What is the minimum amount of interest rate risk you can have? What will happen to the value of your portfolio if interest rates increase by 1%?
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