Question
In: Accounting
The balance sheet for Gotbucks Bank (GBI) is presented below: ( $ MM ): Assets
- The balance sheet for Gotbucks Bank (GBI) is presented below: ( $ MM ):
Assets Lib & Equity
Cash 30 Core deposits 20
Loans (floating) 125 EURO CDs 180
Loans Fixed 65 Equity 20
Total assets 220 TE + TL 220
Notes: the floating rare is LIBOR + 4%
Current LIBOR = 11%
Fixed rate loans 5 yr maturity priced at par coupon = 12%
Core deposits fixed rate at 8% paid annually
Euros yields 9%
- What is the duration of the fixed rate loan portfolio of Gotbucks Bank?
- If the duration of the floating rate loans is 0.3 year, what is the duration of GBI assets?
- What is the duration of the core deposits if they are priced at par?
- If the duration of the Euro CDs is 0.401 year, what is the duration of GBI’s liabilities?
- What is GBI’s duration gap? What is its interest rate risk exposure?
- What is the impact on the market value of equity if the relative change in all market interest rate is an increase of 1%?
- What is the impact on the market value of equity if the relative change in all interest rates is a decrease of 0.5%?
- What variables are available to GBI to immunize the bank? How much would each variable need to change to get DGAP to equal to zero?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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Consider the balance sheet for the Georgia bank as presented
below.
Georgia Bank Balance Sheet
Assets
Liabilities
Government securities
$1,600
Checking accounts
$4,000
Required Reserves
$400
Net Worth
$1,000
Excess Reserves
$0
Loans
$3,000
Total Assets
$5,000
Total Liabilities
$5,000
Using a required reserve ratio of 10% and if the bank keeps no
excess reserves, write the changes to the balance sheet for each of
the following scenarios:
Steve withdraws $200 from his checking account.
The Fed buys $2,000 in...
Consider the balance sheet for the Wahoo bank as presented below. Wahoo Bank Balance Sheet Assets...
Consider the balance sheet for the Wahoo bank as presented
below.
Wahoo Bank Balance Sheet
Assets
Liabilities
government securities
$1,600
Liabilities:
Checking accounts
$4,000
Required Reserves
$400
Net Worth
$1,000
Excess Reserves
$0
Loans
$3,000
Total Assets
$5,000
Total Liabilities
$5,000
Using a required reserve ratio of 10% and assuming that the bank
keeps no excess reserves, write the changes to the balance sheet
for each of the following scenarios:
Bennett withdraws $500 from his checking account.
The Fed buys...
Bank A Balance Sheet Assets  
Bank A Balance Sheet
Assets Liabilities
Reserves $60
million Deposits $600
million
Loans $640
million Capital $100
million
Bank B Balance Sheet
Assets Liabilities
Reserves $90
million Deposits $600
million
Loans $610
million Capital $100
million
Assume the Required Reserve Ratio is 10% as mandated by the Fed.
Both banks are free to keep required reserves in accordance with
their respective bank policies.
If both banks suffer a $10 million deposit outflow, which bank
is in a better shape now, Bank A or Bank B? Why? Explain
your answer by showing and usingboth banks’...
The financial statements for THE Bank are shown below: Balance Sheet THE Bank Assets Liabilities and...
The financial statements for THE Bank are shown below:
Balance Sheet THE Bank
Assets
Liabilities and Equity
Cash
$
220
Demand deposits
$
2,470
Demand deposits from other FIs
620
Small time deposits
4,820
Investments
1,820
Jumbo CDs
1,445
Federal funds sold
920
Federal funds purchased
1,020
Loans
6,920
Equity
815
Reserve for loan losses
(700
)
Premises
770
Total assets
$
10,570
Total liabilities/equity
$
10,570
Income Statement THE Bank
Interest income
$
2,470
Interest expense
1,650
Provision for...
The financial statements for THE Bank are shown below: Balance Sheet THE Bank Assets Liabilities and...
The financial statements for THE Bank are shown below:
Balance Sheet THE Bank
Assets
Liabilities and Equity
Cash
$
220
Demand deposits
$
2,470
Demand deposits from other FIs
620
Small time deposits
4,820
Investments
1,820
Jumbo CDs
1,445
Federal funds sold
920
Federal funds purchased
1,020
Loans
6,920
Equity
815
Reserve for loan losses
(700
)
Premises
770
Total assets
$
10,570
Total liabilities/equity
$
10,570
Income Statement THE Bank
Interest income
$
2,470
Interest expense
1,650
Provision for...
The financial statements for THE Bank are shown below: Balance Sheet THE Bank Assets Liabilities and...
The financial statements for THE Bank are shown below: Balance
Sheet THE Bank Assets Liabilities and Equity Cash $ 280 Demand
deposits $ 2,530 Demand deposits from other FIs 680 Small time
deposits 4,880 Investments 1,880 Jumbo CDs 1,505 Federal funds sold
980 Federal funds purchased 1,080 Loans 6,980 Equity 735 Reserve
for loan losses (900 ) Premises 830 Total assets $ 10,730 Total
liabilities/equity $ 10,730 Income Statement THE Bank Interest
income $ 2,490 Interest expense 1,710 Provision for...
The financial statements for THE Bank are shown below: Balance Sheet THE Bank Assets Liabilities and...
The financial statements for THE Bank are shown below:
Balance Sheet THE Bank
Assets
Liabilities and Equity
Cash
$
260
Demand deposits
$
2,510
Demand deposits from other FIs
660
Small time deposits
4,860
Investments
1,860
Jumbo CDs
1,485
Federal funds sold
960
Federal funds purchased
1,060
Loans
6,960
Equity
895
Reserve for loan losses
(700
)
Premises
810
Total assets
$
10,810
Total liabilities/equity
$
10,810
Income Statement THE Bank
Interest income
$
2,470
Interest expense
1,690
Provision for...
Presented below is the balance sheet for HHD, Inc., at December 31, 2018. Current assets $...
Presented below is the balance sheet for HHD, Inc., at December
31, 2018.
Current assets
$
656,000
Investments
542,000
Property, plant, and
equipment
2,392,000
Intangible assets
228,000
Total assets
$
3,818,000
Current liabilities
$
456,000
Long-term liabilities
722,000
Shareholders' equity
2,640,000
Total liabilities and
shareholders' equity
$
3,818,000
The captions shown in the summarized statement above include the
following:
Current assets: cash, $164,000; accounts receivable, $214,000;
inventories, $239,000; and prepaid insurance, $39,000.
Investments: investments in common stock, short term, $104,000,...
Presented below is the balance sheet for HHD, Inc., at December 31, 2018. Current assets $...
Presented below is the balance sheet for HHD, Inc., at December
31, 2018.
Current assets
$
656,000
Investments
542,000
Property, plant, and
equipment
2,392,000
Intangible assets
228,000
Total assets
$
3,818,000
Current liabilities
$
456,000
Long-term liabilities
722,000
Shareholders' equity
2,640,000
Total liabilities and
shareholders' equity
$
3,818,000
The captions shown in the summarized statement above include the
following:
Current assets: cash, $164,000; accounts receivable, $214,000;
inventories, $239,000; and prepaid insurance, $39,000.
Investments: investments in common stock, short term, $104,000,...
First National Bank Balance sheet Assets &
First National Bank Balance sheet
Assets
Liabilities
Rate-sensitive $20
million $50
million
Fixed-rate
$80 million $50
million
4) Given the above table and assuming that the average duration
of its assets is four years, while the average duration of its
liabilities is three years, then a 5 percentage point increase in
interest rates will cause the net worth of First National to
________ (increase/decline) by ________ (5% /10%/ 15%/ 20%) of the
total original asset value (use...
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