Assume that a bank has assets located in Germany worth €360 million earning an average of...

Assume that a bank has assets located in Germany worth €360 million earning an average of 9 percent. It also holds €280 in liabilities and pays an average of 6 percent per year. The current spot rate is €1.50 for $1. If the exchange rate at the end of the year is €2.00 for $1:

What is the effect of the exchange rate change on the net interest margin (interest received minus interest paid) in dollars from its foreign assets and liabilities? Net interest margin is reduced by

What is the effect of the exchange rate change on the value of the assets and liabilities in dollars? Assets declined by _____ million and liabilities by ____ million, net worth declined by ____ million using current spot rates

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

11. Assume that a bank has assets located in London worth £150 million on which it...

11. Assume that a bank has assets located in London worth £150 million on which it earns an average of 8 percent per year. The bank has £100 million in liabilities on which it pays an average of 6 percent per year. The current spot exchange rate is £2/$. a. Given new exchange rate is £1.80/$ what is the effect in dollars on the net interest income from the foreign assets and liabilities? Note: The net interest income is interest...

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...

The Tidewater State Bank has $1,000 in total assets (all of which are earning assets), $700...

The Tidewater State Bank has $1,000 in total assets (all of which are earning assets), $700 of which will be repriced within the next 90 days. This bank also has $800 in total liabilities, $400 of which will be repriced within the next 90 days. Currently, the bank is earning 8 percent on its assets and is paying 5 percent on its liabilities. If interest rates on both assets and liabilities decrease by 2 percent in the next 90...

The Harris State Bank has $2,000 in total assets (all of which are earning assets), $500...

The Harris State Bank has $2,000 in total assets (all of which are earning assets), $500 of which will be repriced in the next 90 days. This bank also has $1,600 in total liabilities, $1,000 of which will be repriced in 90 days. The bank currently earns 9 percent on its assets and pays 4 percent on its liabilities. If interest rates on both assets and liabilities rise by 2 percent in the next 90 days, what would be...

(2.)Suppose the First National Bank of Duluth has $500.00 million in total assets with an average...

(2.)Suppose the First National Bank of Duluth has $500.00 million in total assets with an average asset duration offive years. Assume that the bank’s liabilities are comprisedof $86.75 million of demand deposits and $163.75 million inbonds with a 4.00% coupon rate (which pays annually) and a fiveyear time-to-maturity. Further assume that currentmarket interest rates are at 9.00% per annum. (a.)(2 point) Calculate the duration of the bank’s bonds.

Suppose a bank has $100 million in assets, and $90 million in liabilities. If assets increase...

Suppose a bank has $100 million in assets, and $90 million in liabilities. If assets increase 5%, and liabilites increase 10%, then how much did bank’s equity change? (Answer is 6.0) please show me how with work!!!

A financial institution has $100 million of fixed earning assets that mature in 2 years. The...

A financial institution has $100 million of fixed earning assets that mature in 2 years. The assets earn an average of 8%. These are funded by 6 month CD liabilities paying 3.5%. If in 6 months interest rates increase 100 basis points How does the NIM change?

Standard bank has assets of $ 150 million, liabilities of $ 135 million and equity of...

Standard bank has assets of $ 150 million, liabilities of $ 135 million and equity of $ 15 million. It asset duration is six years and the duration of the liabilities is for four years. Standards bank wishes to hedge the balance sheet with 20-year T-bond futures contracts, witch are currently trading at $95 per $100 face value and duration of 10.37 year. Note that T-bond futures are sold in $100000 face value per contract. What is the duration gap...

Palawan Financing has total assets worth $900 million and total liabilities worth $475 million at the end of December 31, 2016

34. Palawan Financing has total assets worth $900 million and total liabilities worth $475 million at the end of December 31, 2016. What is the amount of money received by the stockholders, if Palawan Financing liquidates all of its assets for $850 and pays off all of its outstanding debt?a.$850 millionb.$475 millionc.$1,325 milliond.$425 millione.$375 million43. Anton is considering putting money in an investment plan that will pay him $52,000 in 12 years. If Anton's opportunity cost rate is 7 percent...

A mutual fund has total assets worth of $50 million. Suppose the fund owes $3 million...

A mutual fund has total assets worth of $50 million. Suppose the fund owes $3 million to its investment advisers and owes another $2 million for rent, wages due, and miscellaneous expenses. The fund has 15 million shares. What is the NAV per share of this fund? 3.333333333 3 3.2 3.133333333

Subjects