The marginal cost of funds to XYZ Bank Limited is: Demand deposits 6.50% Time deposits 7.50% Savings deposits 8.50% Debentures 11.75% Common equity 22.0%
The marginal cost of funds to XYZ Bank Limited is: Demand deposits 6.50% Time deposits 7.50% Savings deposits 8.50% Debentures 11.75% Common equity 22.0%
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
If the interest rates rise by 1.5%, what is the change in net interest income assuming a parallel shift in the yield curve? Define the maturity bucket approach as an extension to the gap analysis, and how it can be used to manage interest rate risk.
B.
A bank has $100 million in earning assets, a net interest margin of 5%, and a 1-year cumulative GAP of $10 million. Interest rates are expected to increase by 2%. If the bank does not want net interest income to fall by more than 25% during the next year, how large can the cumulative GAP be to achieve the allowable change in net interest income?
Transcribed Image Text:The marginal cost of funds to XYZ Bank Limited is:
Demand deposits
6.50%
Time deposits
7.50%
Savings deposits
8.50%
Debentures
11.75%
Common equity
22.0%
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