A bank has made a $10 million loan with no prepayment penalties at a rate of  T-Bill (3-month) + 10%, reset every six months. It is funded by wholesale deposits procured at T-Bill (3-month) + 5%, reset every six months. What interest rate risk does the bank face?     Basis Risk       Yield curve risk       Repricing risk       Embedded options risk

We have seen before that money deposited into an account with continuous interest follows the A = Pe' formula. However, this required strict conditions %3D that the money cannot be withdrawn or added to throughout the term of the investment. A more complicated model that allows for deposits/withdraws is: A (t) = Pert + K (ert – 1 | where K is the constant amount deposited (K> 0) or withdrawn (K < 0) each year. Problem: A $270,000 home mortgage with a rate of 5.3 % compounded continuously is borrowed for a period of 30 years. (A) Find the amount, K, that is needed to be paid off each year. (note: your K value should be negative because it is a "withdraw" from the principal, but your answer should be reported as a positive number) To pay off the loan in 30years, $ Number would need to be paid off each year. (round to the nearest cent) (B) Using the value found in part (A), how much money will be spent over the period of the loan repaying the initial balance of $270,000? $ Number (round…

A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers?

T\vo banks offer the following interest rates on your deposit:• Bank A : 9% interest compounded continuously• Bank B: 8.5% interest compounded continuouslyWhich of the following statements is not true?(a) The annual percentage yield (APY) for Bank A is 9.30%.(b)"the effective annual interest rate for Bank Bis 8.87%.(c) Bank A offers a better deal.(d) The annual percentage rate (APR) for Bank 8 is 8.5%.