Assume you are the manager of an FI. how would you steucture your balance sheet using the reprici...
Homework Answers
I would create negative gap model as reprising gap model ignore the market value due to the effect of changing interest rates an it is incomplete measure of true interest rate risk.
An FI with a negative reprising gap model has not particular expectations regarding interest rate movements and hence negative gap model is suitable.
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Assume you are the manager of an FI. how would you steucture your balance sheet using the reprici...
8. Study the following Balance Sheet. Based on its structure, what is the potential liability to...
8. Study the following Balance Sheet. Based on its structure, what is the potential liability to the bank if interest rates decrease 1% during a 1-year period? Bank “A” Balance Sheet (in $1,000,000s) Assets Liabilities Cash & Cash Equivalents $ 5.00 Demand Deposits $ 508.00 Loans: Fixed-Rate Passbook Accounts $ 978.00 <6-month $ 23.00 3-Mo Comm'l Paper $ 2.70 6-12 months $ 22.00 Time Deposits: 1-year $ 134.00 1-year $ 2,335.50 2-years $ 142.00 2-year $ 1,226.80 >15-years $ 5,567.00...
A bank manager would want to set the repricing gap greater than zero when interest rates...
A bank manager would want to set the repricing gap greater than zero when interest rates are expected to rise. True/False and why
Consider the following balance sheet (in millions) for an FI: Assets Duration = 13 years $...
Consider the following balance sheet (in millions) for an FI: Assets Duration = 13 years $ 970 Liabilities Duration = 5 years Equity $ 900 70 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the Fi's equity value...
Consider the following balance sheet for Watchover Savings Inc. (in millions Floating rate mortgages (currently 12%...
Consider the following balance sheet for Watchover Savings Inc. (in millions Floating rate mortgages (currently 12% p.a.) 30-year fixed-rate loans (currently p.a.) $ 92 106 $121 Liabilities and Equity Now deposits (currently p.a.) 5-year tine deposits (currently p.a.) Louity Total Total $198 .. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e. 32.18) b. What will be the net interest income at year-end If interest rates rise by 3...
4. Consider the following balance sheet (in millions) for an FI: Assets Duration = 10 years...
4.
Consider the following balance sheet (in millions) for an FI: Assets Duration = 10 years $ 910 Liabilities Duration = 4 years Equity $ 810 100 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the FI's equity...
Suggested time: 60 minutes. Answer both questions. 1. Consider the following balance sheet for DeMontfort Savings...
Suggested time: 60 minutes. Answer both questions. 1. Consider the following balance sheet for DeMontfort Savings Bank plc. (in millions): Liabilities and Equity Demand deposits Assets Floating-rate mortgages (currently 10% annually) 30-year fixed-rate loans (currently 7% annually) E70 £50__ (currently 6%,annually). Time deposits (currently 6% annually) £20 £10 Total Liabilities & Equity £100 £50 Equity Total Assets £100 What is DeMontfort Savings Bank's expected net interest income (a) at year-end? (3 marks) (b) What will be the net interest income...
please solve question 4 and 5 4. A bank has the following balance sheet: Assets Rate...
please solve question 4 and 5
4. A bank has the following balance sheet: Assets Rate sensitive Fixed rate Nonearning Total Avg. Rate 7.75% 8.75 Avg Rate 6.25% 7.50 $550,000 955,000 565,000 $2,070,000 Liabilities/Equity Rate sensitive $375,000 Fixed rate 805,000 Nonpaying 890,000 Total $2,070,000 ise such that the average yield on rate-sensitive assets increases by 45 basis points and the average yield on rate-sensitive liabilities increases by 35 basis points. a) Calculate the bank's repricing GAP, gap to total assets...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilities and Equity Floating-rate...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilities and Equity Floating-rate mortgages (currently 10% p.a.) $ 94 Now deposits (currently 6% p.a.) $ 122 30-year fixed-rate loans (currently 7% p.a.) 107 5-year time deposits (currently 6% p.a.) 33 Equity 46 Total $ 201 Total $ 201 a. What is Watchover’s expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the net interest...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 11%...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 11% p. a.) 30-year fixed-rate loans (currently 8% p. a.) $ 98 109 Liabilities and Equity Now deposits (currently 7% p. a.) 5-year time deposits (currently 7% p. a.) Equity Total $124 36 47 $207 Total $207 a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the net...
Problem 22-3 (LG 22-1) Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets...
Problem 22-3 (LG 22-1) Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 10% p.a.) 30-year fixed-rate loans (currently 7% p.a.) $ 68 94 Liabilities and Equity Now deposits (currently 67 p.a.) 5-year time deposits (currently 66 p.a.) Equity Total $109 17 36 $162 Total $ 162 a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the...
Consider the following balance sheet (in millions) for an FI: Assets Duration = 13 years $ 970 Liabilities Duration = 5 years Equity $ 900 70 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the Fi's equity value...
Consider the following balance sheet for Watchover Savings Inc. (in millions Floating rate mortgages (currently 12% p.a.) 30-year fixed-rate loans (currently p.a.) $ 92 106 $121 Liabilities and Equity Now deposits (currently p.a.) 5-year tine deposits (currently p.a.) Louity Total Total $198 .. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e. 32.18) b. What will be the net interest income at year-end If interest rates rise by 3...
4.
Consider the following balance sheet (in millions) for an FI: Assets Duration = 10 years $ 910 Liabilities Duration = 4 years Equity $ 810 100 a. What is the Fl's duration gap? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) b. What is the Fl's interest rate risk exposure? c. How can the Fl use futures and forward contracts to create a macrohedge? d. What is the impact on the FI's equity...
Suggested time: 60 minutes. Answer both questions. 1. Consider the following balance sheet for DeMontfort Savings Bank plc. (in millions): Liabilities and Equity Demand deposits Assets Floating-rate mortgages (currently 10% annually) 30-year fixed-rate loans (currently 7% annually) E70 £50__ (currently 6%,annually). Time deposits (currently 6% annually) £20 £10 Total Liabilities & Equity £100 £50 Equity Total Assets £100 What is DeMontfort Savings Bank's expected net interest income (a) at year-end? (3 marks) (b) What will be the net interest income...
please solve question 4 and 5
4. A bank has the following balance sheet: Assets Rate sensitive Fixed rate Nonearning Total Avg. Rate 7.75% 8.75 Avg Rate 6.25% 7.50 $550,000 955,000 565,000 $2,070,000 Liabilities/Equity Rate sensitive $375,000 Fixed rate 805,000 Nonpaying 890,000 Total $2,070,000 ise such that the average yield on rate-sensitive assets increases by 45 basis points and the average yield on rate-sensitive liabilities increases by 35 basis points. a) Calculate the bank's repricing GAP, gap to total assets...
Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 11% p. a.) 30-year fixed-rate loans (currently 8% p. a.) $ 98 109 Liabilities and Equity Now deposits (currently 7% p. a.) 5-year time deposits (currently 7% p. a.) Equity Total $124 36 47 $207 Total $207 a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the net...
Problem 22-3 (LG 22-1) Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Floating-rate mortgages (currently 10% p.a.) 30-year fixed-rate loans (currently 7% p.a.) $ 68 94 Liabilities and Equity Now deposits (currently 67 p.a.) 5-year time deposits (currently 66 p.a.) Equity Total $109 17 36 $162 Total $ 162 a. What is Watchover's expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the...
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