. Consider the following balance sheet positions for a financial institution: (1) Rate-sensitive assets = $500...

. Consider the following balance sheet positions for a financial institution:

(1) Rate-sensitive assets = $500 million. Rate-sensitive liabilities = $300 million

(2) Rate-sensitive assets = $200 million. Rate-sensitive liabilities = $350 million

(3) Rate-sensitive assets = $270 million. Rate-sensitive liabilities = $250 million

a) Calculate the repricing gap and the impact on NII of a 2 percent decrease in interest rates.

b) Calculate the repricing gap and impact on NII assuming a 3 percent increase in interest rates.

c) What conclusion can you draw about the repricing model from these results?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Assume the following balance sheet for the first national bank: Assets - - Rate sensitive assets...

Assume the following balance sheet for the first national bank: Assets - - Rate sensitive assets 40 Million - Fixed rate assets 60 Million Liabilities - - Rate sensitive liabilities 80 million - fixed rate liabilities 20 million What is the effect of a 4% increase in interest rate on profits?

A financial institution has the following market value balance sheet structure: Assets Liabilities and Equity Cash...

A financial institution has the following market value balance sheet structure: Assets Liabilities and Equity Cash $ 1,400 Certificate of deposit $ 10,400 Bond 10,400 Equity 1,400 Total assets $ 11,800 Total liabilities and equity $ 11,800 a. The bond has a 10-year maturity, a fixed-rate coupon of 10 percent paid at the end of each year, and a par value of $10,400. The certificate of deposit has a 1-year maturity and a 6 percent fixed rate of interest. The...

A financial institution has the following market value balance sheet structure: Assets Liabilities and Equity Cash...

A financial institution has the following market value balance sheet structure: Assets Liabilities and Equity Cash $ 2,400 Certificate of deposit $ 11,400 Bond 10,200 Equity 1,200 Total assets $ 12,600 Total liabilities and equity $ 12,600 a. The bond has a 10-year maturity, a fixed-rate coupon of 12 percent paid at the end of each year, and a par value of $10,200. The certificate of deposit has a 1-year maturity and a 6 percent fixed rate of interest. The...

Balance Sheet of Star Bank Ltd. Assets $ yield Liabilities $ yield Rate sensitive 1500...

Balance Sheet of Star Bank Ltd. Assets $ yield Liabilities $ yield Rate sensitive 1500 12% 1800 9% Fixed rate 1050 15% 860 8% Other earnings 450 6% 540 4% Non-earnings 800 Equity=600 Total 3800 3800 Calculate the net interest income, net interest margin and the funding GAP If the size of the bank increases by 60% and at the same time short term rate increases by 1%, how would this affect net interest income, net interest margin and...

A financial institution has the following balance sheet structure: Assets USD million Liabilities USD million Cash...

A financial institution has the following balance sheet structure: Assets USD million Liabilities USD million Cash 10 Equity 30 Bond 100 Certificate of Deposit 100 Real Estate 20 Total 130 Total 130 The USD 100 million bond has a three year maturity paying 10 percent interest per year. The USD 100 million certificate of deposit has a two-year maturity and paying 8 percent interest per year. The bond and certificate of deposit will be rolled over after their maturities at...

Consider a Financial Institution with the following assets and liabilities. Asset A has a maturity of...

Consider a Financial Institution with the following assets and liabilities. Asset A has a maturity of 3 years and a market value of $40,000 and asset B has a maturity of 6 years and a market value of $90,000. Liability A has a maturity of 2 years and a market value of $60,000 and liability B has a maturity of 12 years and a market value of $50,000. What is the maturity gap of this FI (round your answer to...

Consider the following balance sheet for ABC Inc( in millions) Assets Liabilities and Equity Floating Rate...

Consider the following balance sheet for ABC Inc( in millions) Assets Liabilities and Equity Floating Rate loans ( currently 6% annually) = $80 Demand Deposits(currently at 1% annually) = $30 20 year fixed rate loans ( currently 5% annually) = $20 Time Deposits( currently at 6% annually) = $60 Total Assets = $100 Equity = $10 Total Liabilities and Equity = $100 a) What is ABC's expected net interest income at year end? b) What will be the net interest...

Consider the following balance sheet for Watchover Savings, Inc. (in millions): Assets Liabilities and Equity Floating-rate...

Consider the following balance sheet for Watchover Savings, Inc. (in millions): Assets Liabilities and Equity Floating-rate mortgages (currently 12% p.a.) $ 86 Now deposits (currently 8% p.a.) $ 118 30-year fixed-rate loans (currently 9% p.a.) 103 5-year time deposits (currently 8% p.a.) 26 Equity 45 Total $ 189 Total $ 189 a. What is Watchover’s expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) Net interest income $ million b. What...

Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilities and Equity Floating-rate...

Consider the following balance sheet for Watchover Savings Inc. (in millions): Assets Liabilities and Equity Floating-rate mortgages (currently 12% p.a.) $ 70 Now deposits (currently 8% p.a.) $ 110 30-year fixed-rate loans (currently 9% p.a.) 95 5-year time deposits (currently 8% p.a.) 21 Equity 34 Total $ 165 Total $ 165 a. What is Watchover’s expected net interest income at year-end? (Enter your answer in millions rounded to 2 decimal places. (e.g., 32.16)) b. What will be the net interest...

Consider the following balance sheet for WatchoverU Savings Inc. ($ in millions): Assets Liabilities Floating-rate mortgages...

Consider the following balance sheet for WatchoverU Savings Inc. ($ in millions): Assets Liabilities Floating-rate mortgages (currently 10% annually) $ 60 NOW accounts (currently 6% annually) $ 80 30-year fixed-rate loans (currently 7% annually) 60 Time deposits (currently 6% annually) 24 Equity 16 Total $ 120 $ 120 a. What is WatchoverU’s expected net interest income at year-end? b. What will be the net interest income at year-end if interest rates rise by 2 percent?

Subjects