Assets Market ValueCash$150.00Loans$600,00T-BondTotal1.97124$450.00$1,200.00What is the bank's duration gap?0.55Ⓒ-0.69Ⓒ-162Rate6.00%3.00%Duration (Years)Liabilities and EquityTime DepositsCDs2758.50 EquityTotalMarket Value$750.00$400.00$50.00$1,200.00Rate225%1.50%Duration (Years)1.754.50

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Description: Assets Market ValueCash$150.00Loans$600,00T-BondTotal1.97124$450.00$1,200.00What is the bank's duration gap?0.55Ⓒ-0.69Ⓒ-162Rate6.00%3.00%Duration (Years)Liabilities and EquityTime DepositsCDs2758.50 EquityTotalMarket Value$750.00$400.00$50.00$1,200.

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Assets Market Value Rate Cash Loans T-Bond Total $150.00 $600,00 1.97 O 124 0.0.55 Ⓒ-0.69 O-162 $450.00 $1.200.00 6.00% 3.00% What is the bank's duration gap? Duration (Years) Liabilities and Equity Time Deposits 275 CDs 8.50 Equity Total Market Value $750.00 $400.00 $50,00 $1,200.00 Rate 2.25% 1.50% Duration (Years) 1.75 4.50

Assets Market Value Rate Cash Loans T-Bond Total $150.00 $600,00 1.97 O 124 0.0.55 Ⓒ-0.69 O-162 $450.00 $1.200.00 6.00% 3.00% What is the bank's duration gap? Duration (Years) Liabilities and Equity Time Deposits 275 CDs 8.50 Equity Total Market Value $750.00 $400.00 $50,00 $1,200.00 Rate 2.25% 1.50% Duration (Years) 1.75 4.50

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 18MCQ

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Balance Sheet (dollars in thousands) and Duration (in years) Duration AmountT-bills. 0.5 $ 90T-notes 0.9 55T-bonds 4.393 176Loans 7 2,724Deposits. 1 2,092Fed. funds 0.01 238Equity 715What is the average duration of all the assets? What is the average duration of all the liabilities? What is the FI’s leverage-adjusted duration gap? What is the FI’s interest rate risk exposure? If the entire yield curve shifted upward 0.5 percent (i.e., ΔR/(1 + R) = 0.0050), what is the impact on the FI’s market value of equity? If the entire yield curve shifted downward 0.25 percent (i.e., ΔR/(1 + R) = −0.0025), what is the impact on the FI’s market value of equity?
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XYZ Bank has the following Balance sheet: K’M K’million Cash 20 Demand Deposits 100 15-yr, 10% Loan 160 5-yr, 6% CD Balloon 210 30-yr, 8% Bond 300 20-yr, 7% Debenture 120 Total Assets 480 Equity 50 Total Liabilities and Equity. 480 What is the Maturity Gap?
Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset5yr bond bought at a yield of 3.4% (lending money) $550M 4.56212.02612yr bond bought at a yield of 4% (lending money) $800M 9.45353.565 Liabilities Value Duration of the Liability Convexity of the Liability2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.3844yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise?
Consider a bank with the following balance sheet (M means million):Assets Value Duration of the Asset Convexity of the Asset5yr bond bought at a yield of 3.4% (lending money) $550M 4.562 12.02612yr bond bought at a yield of 4% (lending money)$800M 9.453 53.565 Liabilities Value Duration of the Liability Convexity of the Liability 2yr bond sold at a yield of 2.4% (borrowing money) $300M 1.941 2.384 4yr bond sold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 Calculate the equity
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IV. Fill the missing items (Use 360 days per year). Interest (I) Principal (P) ? Amount (A) P 3,500 Time (t) days Nos. Rate of Interest (r) 1. ? 8% 60 2. ? 6% P2, 250 560 ? 90 3. ? ? 5 ½ % 120 4. ? 5,300 3% % 80 5. P 250 ? ? 6% 380 IV. Differentiate stocks from bonds. Determine which is more likely to invest.
Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset 5yr bond bought at a yield of 3.4% (lending money) $550M 4.562 12.026 12yr bond bought at a yield of 4% $800M 53.565 (lending money) 9.453 Liabilities Value Duration of the Liability Convexity of the Liability $300M 2yr bond sold at a yield of 2.4% (borrowing money) 1.941 2.384 $500M 4yr bond sold at a yield of 2.8% (borrowing money) 3.759 8.206 a) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; b) In a)'s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise?
A financial institution that invests $50 million into Digicel Fixed Rate 10 year bonds is exposed to which of the following risks? Question 14Answer a. Credit and interest rate risk. b. Liquidity and technology risk. c. Solvency and technology risk. d. Off-balance sheet and interest rate risk.
Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets 5yr bond bought at a yield of 3.4% (lending money) 12yr bond bought at a yield of 4% (lending money) Liabilities 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) Value $550M $800M Duration of the Asset 4.562 9.453 Convexity of the Asset 12.026 53.565 Convexity of the Liability 2.384 8.206 Value$300M 1.941 Duration of the Liability $500M 3.759 1) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio 2）In 1）‘s scenario, to maintain the equity to asset ratio at 40% which is required by the regulation, the bank decides to raise cash (zero duration and zero convexity) from the equity holders. How much cash does the bank need to raise? 3）Do you agree with the following statement? Explain why. “The information about a bond’s…
Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset $550M 5yr bond bought at a yield of 3.4% (lending money) 4.562 12.026 $800M 12yr bond bought at a yield of 4% (lending money) 9.453 53.565 Liabilities Value Duration of the Liability | Convexity of the Liability $300M 2yr bond sold at a yield of 2.4% (borrowing money) 1.941 2.384 4yr bond sold at a yield of 2.8% $500M 3.759 8.206 (borrowing money) a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio;
Question 3. Bond Consider a bank with the following balance sheet (M means million): Assets 5yr bond bought at a yield of 3.4% (lending money) 12yr bond bought at a yield of 4% (lending money) Liabilities 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) Value $550M $800M Duration of the Asset 4.562 9.453 Convexity of the Asset 12.026 53.565 Convexity of the Liability 2.384 8.206 Value$300M 1.941 Duration of the Liability $500M 3.759 a) Calculate the equity (total asset – total liability) to asset ratio of the bank (Hint: equity to asset ratio = total equity/total asset) b) Calculate the duration and convexity of the both asset and liability sides; c) If the interest rates go up by 1%, using the duration and convexity rule to determine the net worth of the bank and the equity to asset ratio; d) In c)’s scenario, to maintain the equity to asset ratio at 40% which is required by the…