2. Suppose the bond's YTM changes in the same way as a 5-year T-bill int Use the bond's modified duration to evaluate the relative change in the 5-y value if the interest rate on 5-year T-bills falls by one basis point, that is, This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) | Liabilities (Billion AUD) Fixed-rate liabilities 60 Bond 80 where "Bond" here refers to the bond we specified above and the fixed-rate (banks future payment obligations) have an average duration of 4 years and Y Their YTM changes in the same way as a 5-year T-bill interest rate. 3. Bank's equity is the difference between its assets and its liabilities. How d equity change, if the T-bill interest rate increases by 10 basis point?

2. Suppose the bond's YTM changes in the same way as a 5-year T-bill int Use the bond's modified duration to evaluate the relative change in the 5-y value if the interest rate on 5-year T-bills falls by one basis point, that is, This part was extracted from the balance sheet of the First Bank of Australia: Assets (Billion AUD) | Liabilities (Billion AUD) Fixed-rate liabilities 60 Bond 80 where "Bond" here refers to the bond we specified above and the fixed-rate (banks future payment obligations) have an average duration of 4 years and Y Their YTM changes in the same way as a 5-year T-bill interest rate. 3. Bank's equity is the difference between its assets and its liabilities. How d equity change, if the T-bill interest rate increases by 10 basis point?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 17P: Bond Value as Maturity Approaches An investor has two bonds in his portfolio. Each bond matures in 4...

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