Question

Use the following to answer questions 8-25. Bank of Baruch (BOOK VALUES - S millions) Assets: Liabilities: 180 day US Treasury bills $350m Overnight Repos 2 year C&I loans $500m 1 year Certificates of Deposit 10 yr floating rate mortgages $250m 30 year Subordinated debt 10 year US Treasury bonds $200m Equity 15 yr commercial mortgages S600m $275m $925m $560m Notes: The 180-day US Treasury bills yield 1.5% pa. The two year commercial (C&I) loans have an annual coupon rate of 5.5% p.a. and a yield of 6.5% p.a. with 0% amortization. The 10 year floating rate mortgages, with a quarterly roll date, priced at LIBOR + 350 basis points, are currently selling at par. The 10 year U.S. Treasury bond lave a 3% p.a. coupon, yield 2.25% p.a., and have a duration of 8.76 years. The 15 year gages are 100% amortized, have a fixed quarterly coupon, yield 5% p. e priced at par, and have a duration of 6.7 years. The overnight repo rate is 0.25% p- iced at par. The 1 year Certificates of Deposit have an annual coupon rate of 0.90% . and are priced at par. The 30 year Subordinated bullet bond has a semi-annual pon rate of 4% p.a., yields 4.5% p.a. and has a duration of 17.17 years. 3. What is the bank's equity to asset ratio? a. $100 million b. 6.45% c. 7.37% d. 9.86% e. 6.31% What is the 91 day cumulative repricing gap? a. +$575 million b. -$498 million

Answer 1

1.

Total Assets = $ 350 + 500 + 250 + 200+ 600 = $1900 mn

Total Liabilities (excluding equity) = $275 + 925 + 560 = $1760 mn

Equity = Total Assets - Total Liabilities (excluding equity) = $1900 mn - $1760 mn = $140 mn

Answer is c

Equity to Total Assets Ratio = Equity / Total Assets = $140 mn / $1900 mn = 0.07368 = 7.37%

2. Repricing GAP = cumulative interest-sensitive assets repricing within 91 days minus the cumulative amount of interest-sensitive liabilities epricing within 91 days = (10 year floating rate mortgage with quarterly roll date + 15 year commercial mortgage 100% amortized quarterly paid) - Overnight repos = $ 250 + 600 - 275 = $ 575 mn