A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 15-year duration, and $19 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? A) 3.95 years B) 6.16 years C) 6.50 years D) 7.38 years E) 11.51 years

A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 15-year duration, and $19 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? A) 3.95 years B) 6.16 years C) 6.50 years D) 7.38 years E) 11.51 years

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 16P

See similar textbooks

Similar questions

4. A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 15-year duration, and $19 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? A) 3.95 years B) 6.16 years C) 6.50 years D) 7.38 years E) 11.51 years
A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 16-year duration, and $39 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? Group of answer choices 11.51 years 7.38 years 3.95 years 5.68 years
Eagle Bank has the following interest-sensitive assets and interest-sensitive liabilities. Amount maturing in Amount maturing in 30 days (million) 570 330 116 Interest-sensitive assets Loans Securities 30 days (million) 810 63 Interest rate on interest-sensitive assets is 5% Interest rate on interest-sensitive liabilities is 3% Interest-sensitive liabilities Savings deposits Time deposits Money market The interest rate is expected to rise 1% (for both interest-sensitive assets and liabilities) 30 days later. Will Eagle Bank benefit from the interest rate rise? Explain your answer. Show your calculations.
Lambrook Bank has the following assets and liabilities: Asset A has a maturity of 4 years and a market value of $600,000 and asset B has a maturity of 6 years and a market value of $800,000. Liability X has a maturity of 2 years and a market value of $200,000 and liability Y has a maturity of 5 years and a market value of $300,000. What is the maturity gap of the bank? . .
A bank has earning assets of $100 million including $30 million of securities that pay an interest rate of 3%, and $70 million of loans that pay an interest rate of 6% financed by $100 million of deposits paying an interest rate of 3%. What is the bank's Net Interest Margin (NIM)?
A bank makes an amortizing loan of $200,000 with a maturity of 8 years and equal payments every year. What is the principal outstanding at the end of year 6 if the interest rate is 6%? A $27,041.78 B $30,384.41 C $59,048.42 D $86,092.20
Carey Company is borrowing $250,000 for one year at 10.0 percent from Second Intrastate Bank. The bank requires a 18 percent compensating balance. The principal refers to funds the firm can utilize effectively (Amount borrowed - Compensating balance) a. What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) Effective rate of interest b. What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) Effective rate of interest
Given the balance sheet of XYZ Bank appears below. All figures in millions of U.S. dollars, the total one-year rate-sensitive assets is Assets 1 Short-term consumer loans (one-year maturity) 2 Long-term consumer loans 3 Three-month Treasury bills 4 Six-month Treasury notes 5 Three-year Treasury bond 6 10-year, fixed-rate mortgages 7 30-year, floating-rate mortgages (rate adjusted every nine months) Liabilities $ 150 1 Equity capital (fixed) $ 120 125 2 130 3 135 4 170 5 Demand deposits (two-year maturity) Passbook savings Three-month CDs Three-month bankers acceptances 120 6 Six-month $970 commercial paper 140 7 One-year time deposits 8 Two-year time deposits 40 130 140 120 160 120 40 $970 Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
b) The manager for Tyler Bank and Trust has the following assets to manage: Duration Duration Asset Bonds (in years) 75,000,000 9.00 Consumer Loans 875,000,000 2.00 Value Liability Demand Deposits 300,000,000 1.00 Saving Accounts 1,347,000,000 0.50 Value (in years) Commercial Loans 700,000,000 5.00 Compute the duration gap.
Use the balance sheet of a bank below to answer the following. The duration of asset is 1.5 years, the duration of liabilities 2 years. Assets Liabilities Required Reserves 8 m Money Market Deposits 50 m Excess Reserves 7 m 3-year CDs 60 m T-bills 85 m Capital 10 m Mortgages 15m Commercial paper 5m What happens to the value of liability if the interest rate goes down by 1%? up by 2% down by 2% O down by 1.36% O up by 1.36%
Are the following assets rate-sensitive within a six-month time frame? Provide an explanation for each. a) Fed Funds sold (daily repricing) b) Two-year Treasury bond with semiannual coupon payments c) 4-year fully amortized car loan with $350 monthly payments including both principal and interest (for the first six months, principal payments total $448) d) Commercial loan priced at the bank's prime rate plus 2%
A bank invested $50 million in a two-year asset paying 10 percent interest per year and simultaneously issued a $50 million, one-year liability paying 8 percent interest per year to pay for it. • Is the bank short funded or long funded? • What is the bank’s net interest income in year one? • What will be the bank’s net interest income in year two if at the end of the first year all interest rates have decreased by 1.5 percent (150 basis points)?