Use the following information about a hypothetical government security dealer named M.P. Jorgan. Market yields are in parenthesis, and amounts are in millions. All securities are selling at par equal to book value. (4 points) Assets Liabilities and Equity Cash $10 Overnight repos $250 1-month T-bills (7.05%) 85 Subordinated debt 3-month T-bills (7.25%) 100 7-year fixed rate (8.55%) 140 2-year T-notes (7.50%) 90 8-year T-notes (8.96%) 100 5-year munis (floating rate) (8.20% reset every 6 months) 50 Equity 45 Total assets $435 Total liabilities & equity $435 What is the repricing gap if the planning period is 30 days? 3 months? 2 years? Recall that cash is a noninterest-earning asset. What is the impact over the next 30 days on net interest income if interest rates increase 50 basis points on RSA and increase 70 basis points on RSL? The following one-year runoffs are expected: $10 million for two-year T-notes and $20 million for eight-year T-notes. What is the one-year repricing gap? If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise 50 basis points for RSA and increase 80 basis points for RSL?
Use the following information about a hypothetical government security dealer named M.P. Jorgan. Market yields are in parenthesis, and amounts are in millions. All securities are selling at par equal to book value. (4 points)
Assets Liabilities and Equity
Cash $10 Overnight repos $250
1-month T-bills (7.05%) 85 Subordinated debt
3-month T-bills (7.25%) 100 7-year fixed rate (8.55%) 140
2-year T-notes (7.50%) 90
8-year T-notes (8.96%) 100
5-year munis (floating rate)
(8.20% reset every 6 months) 50 Equity 45
Total assets $435 Total liabilities & equity $435
- What is the repricing gap if the planning period is 30 days? 3 months? 2 years? Recall that cash is a noninterest-earning asset.
- What is the impact over the next 30 days on net interest income if interest rates increase 50 basis points on RSA and increase 70 basis points on RSL?
- The following one-year runoffs are expected: $10 million for two-year T-notes and $20 million for eight-year T-notes. What is the one-year repricing gap?
- If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise 50 basis points for RSA and increase 80 basis points for RSL?
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