Bank of North Americans (BNA) has total assets of $250 million with duration of 3.5 years...

Bank of North Americans (BNA) has total assets of $250 million with duration of 3.5 years and total liabilities of $225 million with duration of 1.25 years. If the interest rates decline from 9% to 8% what will the impact on the bank's net worth in absolute terms (or in dollars).

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

1. Suppose a bank has an asset duration of 4 years and a liability duration of 2.75 years. This bank has $1,050 million in assets and $780 million in liabilities.

1. Suppose a bank has an asset duration of 4 years and a liability duration of 2.75 years. This bank has $1,050 million in assets and $780 million in liabilities. They are planning on trading in a Treasury bond future which has a duration of 7.5 years and which is selling right now for $98,500 for a $100,000 contract. How many futures contracts does this bank need to fully hedge itself against interest rate risk? 2. Suppose a Eurodollar...

A bank has $100 million of investment grade bonds with a duration of 9.0 years. This...

A bank has $100 million of investment grade bonds with a duration of 9.0 years. This bank also has $500 million of commercial loans with a duration of 5.0 years. This bank has $300 million of consumer loans with a duration of 2.0 years. This bank has deposits of $600 million with a duration of 1.0 year and non-deposit borrowings of $100 million with an average duration of.25 years. What is this bank's duration gap? These are all of the...

National Tiny Bank (NTB) has $12,000 in total assets. Its asset portfolio currently has a duration...

National Tiny Bank (NTB) has $12,000 in total assets. Its asset portfolio currently has a duration of 4 years. NTB is considering buying a three year Treasury security that has a 7% annual coupon. (1) If the market value of the security is currently $875, what is the duration of the Treasury security? (2) If NTB buys the security, what will be the new duration of its asset portfolio?

The Raymond Burr National Bank has $1,000 in assets with an average duration of 5 years. This ban...

The Raymond Burr National Bank has $1,000 in assets with an average duration of 5 years. This bank has $800 in liabilities with an average duration of 6.25 years. Market interest rates start at 6 percent and fall by 1 percent. If interest rates on both assets and liabilities decrease by 2 percent in the next 90 days, what should happen to this bank's net interest margin? Please show your steps in solving this problem without using Excel.

You calculate that the duration of your assets of your bank is 5.6 years and the...

You calculate that the duration of your assets of your bank is 5.6 years and the duration of your liabilities is 4.2 years. You currently have $70 million in liabilities and $5 million in equity. The interest rate is currently 4%. Calculate the change in net worth if interest rates decrease by 20 basis points.

A bank has an average asset duration of 4.2 years and an average liability duration of 2.4 years.

A bank has an average asset duration of 4.2 years and an average liability duration of 2.4 years. This bank has total assets of $650 million and total liabilities of $420 million. Currently, market interest rates are 7 percent. If interest rates fall by 1 percent (to 6 percent), what is this bank's change in net worth?

Suppose the First National Bank of Austin has $500.00 million in total assets with an average...

Suppose the First National Bank of Austin has $500.00 million in total assets with an average asset duration of five years. Assume that the bank’s liabilities are comprised of $86.75 million of demand deposits and $163.75 million in bonds with a 4.00% coupon rate (which pays annually) and a five year time-to-maturity. Further assume that current market interest rates are at 9.00% per annum. Show work. (a.) Calculate the duration of the bank’s bonds. (b.) What is this bank’s duration...

Consider a bank with the following balance sheet (M means million): Assets Value Duration of the...

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% (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)...

Consider a bank with the following balance sheet (M means million): Assets Value Duration of the...

Consider a bank with the following balance sheet (M means million): Assets Value Duration of the Asset Convexity of the Asset 5yr bondbought at a yield of 3.4% (lending money) $550M 4.562 12.026 12yr bondbought at a yield of 4% (lending money) $800M 9.453 53.565 Liabilities Value Duration of the Liability Convexity of the Liability 2yr bondsold at a yield of 2.4% (borrowing money) $300M 1.941 2.384 4yr bondsold at a yield of 2.8% (borrowing money) $500M 3.759 8.206 Calculate...

Consider the following information about Earl Grey, Inc. Total assets $250 million Total debt $110 million...

Consider the following information about Earl Grey, Inc. Total assets $250 million Total debt $110 million Preferred stock $ 35 million Common stockholders' equity $105 million Net profits after taxes $25.5 million Number of preferred stock outstanding 1.5 million shares Number of common stock outstanding 9 million shares Preferred dividends paid $2.5 per share Common dividends paid $0.70 per share Market price of the preferred stock $32.55 per share Market price of the common stock $26.00 per share Use the...

Subjects