None Week 3: duration and bank value (slides exercise).Part I:Bank ABC has the following 2 bond-like loans:Loan 1: $1m loan fixed for 3 years at 10%Loan 2: $1m loan fixed for 5 years at 12%I.a) The market interest rate is now at 5%. The duration of the bank's loan portfolio isyears. (4 d.p., use spreadsheet to do calculation)1.b) If the market interest rate increases by 1% now, the percentage change of the present value of the portfolio would bepercent. (2 d.p.)ABC has $1.5m of liabilities (at market value) with a duration of 2.68 years. The value of the bank change due to the change in interest rate would be $.thousand. (2 d.p.)

Answers: Duration of the bank's loan portfolio: 3.4581 yearsPercentage change of the present value…

Answered: Week 3: duration and bank value (slides…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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