Question
In: Finance
. 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
jeff jeffy answered 1 year agoRelated 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...
1. A given bank has the following interest‐sensitive assets and liabilities on its balance sheet (in...
1.
A given bank has the following interest‐sensitive assets and
liabilities on its balance sheet (in $ millions). If the interest
rate rises by 1.5%, what is the change of profit?
Interest rate sensitive assets Interest rate sensitive
liabilities
Short term securities $150 Deposits $659
Loans $575
2 Based on the answer to the previous question, should the bank
be concerned about a decrease in interest
rates?
No. Decrease is favorable to the bank because it has a negative
interest...
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...
1. Consider the following Balance Sheet for Total Caribbean Bank(TCB) (in millions) ASSETS LIABILITIES Floating rate...
1. Consider the following Balance Sheet
for Total Caribbean Bank(TCB) (in millions)
ASSETS
LIABILITIES
Floating rate mortgages
120
Demand deposits
110
(currently 12% annually)
(currently 3% annually)
30 years fixed rate loans
1 year CD
50
(currently 7% annually)
80
(currently 6% annually)
Equity
40
200
200
a. What is TCB expected net
interest income (NII) at year end? (1mark)
b. What is TCB expected net interest
income at year end if interest rates grew by 500 basis points.
(1...
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...
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