Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million
a. Calculate the duration gap.
b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10%
c. What should or could you to achieve immunised balance sheet?
Note: Please show all workings.
uestion 1: Solve the following TVM problems using Excel formulas. You MUST use Excel formulas (FV or PV) to receive credit.
ou can assume that all payments are made at the beginning of the period and use "1" for the "type" argument in the formula.
A. Suppose you invest
11,400 today. What is the future value of the investment in
29 years, if interest at
7% is compounded annually?
B. Suppose you invest
$ 11,400 today. What is the future value of the investment in
29 years, if interest at
7% is compounded quarterly?
C. Suppose you invest
$
570 monthly. What is the future value of the investment in
29
29
years, if interest at
+
5% is compounded monthly?
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Question 2
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Ready Accessibility: Investigate
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Suppose SBD Bank has RSA of $150m and RSL of $140m. If interest rates rise by 1 percent on both RSAs and RSLs, what would be the expected annual change in net interest income (ΔNII) based on $GAP? Show your work.
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