Use the data provided for Gotbucks Bank, Incorporated, to answer this question. Gotbucks Bank, Incorporated (dollars in millions) Assets Liabilities and Equity $ 45 Core deposits 35 Federal funds $ 28 Cash Federal funds 65 Loans (floating) Loans (fixed) 120 Euro CDs 145 80 Equity 42 Total assets $ 280 Total liabilities and equity $ 280 Notes to the balance sheet: Currently, the fed funds rate is 10 percent. Variable-rate loans are priced at 3 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Assume that fixed rate loans are non-amortizing. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent. a. What is the duration of Gotbucks Bank's (GBI) fixed-rate loan portfolio if the loans are priced at par? (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) b. If the average duration of GBI's floating-rate loans (including fed fund assets) is 0.51 year, what is the duration of the bank's assets? (Note that the duration of cash is zero.) (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) c. What is the duration of GBI's core deposits if they are priced at par? (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))
Use the data provided for Gotbucks Bank, Incorporated, to answer this question. Gotbucks Bank, Incorporated (dollars in millions) Assets Liabilities and Equity $ 45 Core deposits 35 Federal funds $ 28 Cash Federal funds 65 Loans (floating) Loans (fixed) 120 Euro CDs 145 80 Equity 42 Total assets $ 280 Total liabilities and equity $ 280 Notes to the balance sheet: Currently, the fed funds rate is 10 percent. Variable-rate loans are priced at 3 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Assume that fixed rate loans are non-amortizing. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent. a. What is the duration of Gotbucks Bank's (GBI) fixed-rate loan portfolio if the loans are priced at par? (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) b. If the average duration of GBI's floating-rate loans (including fed fund assets) is 0.51 year, what is the duration of the bank's assets? (Note that the duration of cash is zero.) (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161)) c. What is the duration of GBI's core deposits if they are priced at par? (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))
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
Transcribed Image Text:Use the data provided for Gotbucks Bank, Incorporated, to answer this question.
Gotbucks Bank, Incorporated (dollars in millions)
Assets
Liabilities and Equity
$ 45 Core deposits
35 Federal funds
Cash
$ 28
Federal funds
65
Loans (floating)
Loans (fixed)
120 Euro CDs
145
80 Equity
$ 280 Total liabilities and equity
42
Total assets
$ 280
Notes to the balance sheet: Currently, the fed funds rate is 10 percent. Variable-rate loans are priced at 3 percent over LIBOR (currently
at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Assume that fixed
rate loans are non-amortizing. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9
percent.
a. What is the duration of Gotbucks Bank's (GBI) fixed-rate loan portfolio if the loans are priced at par? (Do not round intermediate
calculations. Round your answer to 3 decimal places. (e.g., 32.161))
b. If the average duration of GBI's floating-rate loans (including fed fund assets) is 0.51 year, what is the duration of the bank's assets?
(Note that the duration of cash is zero.) (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g.,
32.161))
c. What is the duration of GBI's core deposits if they are priced at par? (Do not round intermediate calculations. Round your answer
to 3 decimal places. (e.g., 32.161))
d. If the duration of GBI's Euro CDs and fed fund liabilities is 0.416 year, what is the duration of the bank's liabilities? (Do not round
intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))
e-1. What is GBl's duration gap? (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616))
e-2. What is the expected change in equity value if all yields increase by 300 basis points? (Enter your answer in dollars not in
millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the
nearest dollar amount.)
e-3. Given the equity change in e-2, what is the expected new market value of equity after the interest rate change? (Enter your
answer in dollars not in millions. Negative amount should be indicated by a minus sign. Do not round intermediate calculations.
Round your answer to the nearest dollar amount.)
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