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In: Accounting

The following balance sheet information is available (amounts in thousands of dollars and duration in years)...

The following balance sheet information is available (amounts in thousands of dollars and duration in years) for a financial institution:

AssetsLiabilities and Equity in millions

T-bills $ 95.00, 0.5 year

T-notes $ 125.00, 0.9 year

T-bonds $ 100.00

Loans $2,724.00

Deposits $2,092.00, 1 year

Federal funds $ 282.00 0.01 year

Equity $ 670.00

Treasury bonds are five-year maturities paying 6 percent semiannually and quoted at 0.92.

a. What is the duration of the T-bond portfolio?

b. What is the average duration of all the assets?

c. What is the average duration of all the liabilities?

d. What is the leverage adjusted duration gap? What is the interest rate risk exposure?

e. What is the forecasted impact on the market value of equity caused by a relative upward shift in the entire yield curve of 0.5 percent?

f. If the yield curve shifts downward by 0.25 percent , what is the forecasted impact on the market value of equity?

g. What variables are available to the financial institution to immunize the balance sheet? How much would each variable need to change to get DGAP equal to 0?

Expert Solution

Amounts in Millions

For calculation ref for (a):

ekkarill92 answered 1 year ago

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