Homework Answers
1. The correct answer to the question is ' Two year treasury bond with annual coupon payments'.
2. The correct answer is 'There is no fixed relationship between bank's size and net interest income'. This is primarily because, net interest income largely varies on the basis of interest rates and a lower interest rate may generate a lower net interest income.
3. The correct answer is 'All of the above occur when interest rates fall sharply'. Loans which were earlier taken on fixed rate due to high interest rate will be refinanced to fluctuating rate to reap the benefits of low interest rate, also due to the fact that rate of interest is low on deposits, people will tend to withdraw deposits earlier.
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1.) 2.) 3.) Given a 6 month time-frame, which of the following assets is not rate...
1. Given a 6 month time-frame, which of the following assets is not rate sensitive? A.)...
1. Given a 6 month time-frame, which of the following assets is not rate sensitive? A.) Three-month T-bill. B.) Federal Funds Sold (daily repricing). C.) Two year Treasury bond with annual coupon payments. D.) Four-year fully amortized car loan with $350 monthly payments including both principal and interest. 2.) Holding all other bank characteristics constant, if the bank triples in size, what happens to net interest income? A.) Net interest income will not change. B.) Net interest income will double....
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...
Problem 6 (10%): The balance sheet of XYZ Bank appears below. All figures in millions of...
Problem 6 (10%): The balance sheet of XYZ Bank appears below. All figures in millions of U.S. dollars. Assets $150 1 Equity capital (fixed) Liabilities Short-term consumer loans (one-year maturity) Long-term consumer loans 1252 1303 1354 Three-month Treasury bills Six-month Treasury notes Three-year Treasury bond 1705 Demand deposits (two-year maturity) Passbook savings Three-month CDs Three-month bankers acceptances Six-month commercial paper One-year time deposits 10-year, fixed- rate mortgages 1206 30-year, 1407 floating-rate mortgages (rate adjusted every nine months) Two-year time deposits...
20. A bank has the following balance sheet: Assets Rate sensitive $225,000 Fixed rate 550.000 Nonearning...
20. A bank has the following balance sheet: Assets Rate sensitive $225,000 Fixed rate 550.000 Nonearning 120,000 $895,000 Avg. Rate 6.35% 7.55 Liabilities/Equity Rate sensitive $300,000 Fixed rate 505,000 Nonpaying 90,000 Total $895,000 Avg. Rate 4.25% 6.15 Total Suppose interest rates rise 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. b. Assuming the bank does not change...
Question 2: Bank AAA has $15 million of fixed-rate assets, $30 million of rate-sensitive assets, $25...
Question 2: Bank AAA has $15 million of fixed-rate assets, $30 million of rate-sensitive assets, $25 million of fixed-rate liabilities, $20 million of rate- sensitive liabilities, 5 million of demand deposit, 10 million of securities, and 0.6 million of reserves. Assume that the required reserve is 10%. a. Reflect the above information in a T account. How much is the Net worth? b. Calculate the required reserve and the excess reserve if any, c. Conduct income gap analysis for the...
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...
(6 points) 3. The bank you own has the following balance sheet Liabilities with current interest rate Assets with...
(6 points) 3. The bank you own has the following balance sheet Liabilities with current interest rate Assets with current interest rate $5million $20 million Variable: 1% Checking Fixed: 0% Reserves deposits Savings Deposits $25 million Fixed: 2% $10 million Variable: 2% Government Securities Variable: 3 % $10 million Money Market Deposit Accounts $35 million Fixed: 6% Mortgage Loans Bank Capital To be To be $10 million Variable: 7% Short-Term determined determined Loans Business $20 million Fixed: 9% Loans $80...
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 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...
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...
Problem 6 (10%): The balance sheet of XYZ Bank appears below. All figures in millions of U.S. dollars. Assets $150 1 Equity capital (fixed) Liabilities Short-term consumer loans (one-year maturity) Long-term consumer loans 1252 1303 1354 Three-month Treasury bills Six-month Treasury notes Three-year Treasury bond 1705 Demand deposits (two-year maturity) Passbook savings Three-month CDs Three-month bankers acceptances Six-month commercial paper One-year time deposits 10-year, fixed- rate mortgages 1206 30-year, 1407 floating-rate mortgages (rate adjusted every nine months) Two-year time deposits...
20. A bank has the following balance sheet: Assets Rate sensitive $225,000 Fixed rate 550.000 Nonearning 120,000 $895,000 Avg. Rate 6.35% 7.55 Liabilities/Equity Rate sensitive $300,000 Fixed rate 505,000 Nonpaying 90,000 Total $895,000 Avg. Rate 4.25% 6.15 Total Suppose interest rates rise 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. b. Assuming the bank does not change...
Question 2: Bank AAA has $15 million of fixed-rate assets, $30 million of rate-sensitive assets, $25 million of fixed-rate liabilities, $20 million of rate- sensitive liabilities, 5 million of demand deposit, 10 million of securities, and 0.6 million of reserves. Assume that the required reserve is 10%. a. Reflect the above information in a T account. How much is the Net worth? b. Calculate the required reserve and the excess reserve if any, c. Conduct income gap analysis for the...
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...
(6 points) 3. The bank you own has the following balance sheet Liabilities with current interest rate Assets with current interest rate $5million $20 million Variable: 1% Checking Fixed: 0% Reserves deposits Savings Deposits $25 million Fixed: 2% $10 million Variable: 2% Government Securities Variable: 3 % $10 million Money Market Deposit Accounts $35 million Fixed: 6% Mortgage Loans Bank Capital To be To be $10 million Variable: 7% Short-Term determined determined Loans Business $20 million Fixed: 9% Loans $80...
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 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...
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