-
+1 - 312-224-1615
Get in touch with us
-
support@helpwithassignment.com
Send us an e-mail
Solution Library
Calculate Leverage Adjusted Duration Gap And Reducing Interest Rate Exposure Of Bank
Question
The numbers provided are in millions of dollars and reflect market values:
|
Cash |
|
20 |
Deposits |
historical avg. maturity = 4 years; historical average duration = 3.5 years |
200 |
|
T-Bills |
30 days (4.5 percent, par) |
50 |
Certificates of Deposit |
avg. maturity = 6 months; avg. duration = 6 months |
150 |
|
T-Bills |
91 days (5.0 percent, par) |
60 |
Short-term Debt |
avg. maturity = 4 years |
150 |
|
Commercial Loans |
avg. maturity = 9.0 years; avg. duration = 7.5 years |
300 |
Long-term debt |
avg. maturity = 15 years; average duration = 12 years |
200 |
|
Consumer Loans |
avg. maturity = 6.0 years; avg. duration = 4.0 years |
200 |
Equity |
|
130 |
|
Mortgage Loans – Fixed rate |
avg. maturity = 30 years; avg. duration = 25 years |
150 |
|
|
|
|
Mortgage Loans - Adjustable |
avg. maturity = 30 years; interest rate reset = 6 months |
50 |
|
|
|
|
Total Assets: |
830 |
Total Liabilities & Equity: |
830 |
||
1. What is the leverage adjusted duration gap of the FI?
a. 3.61 years.
b. 3.74 years.
c. 4.01 years.
d. 4.26 years.
e. 4.51 years.
2. A risk manager could restructure assets and liabilities to reduce interest rate exposure for this example by
a. increasing the average duration of its assets to 9.56 years.
b. decreasing the average duration of its assets to 4.00 years.
c. increasing the average duration of its liabilities to 6.78 years.
d. increasing the average duration of its liabilities to 9.782 years.
e. increasing the leverage ratio, k, to 1.
3. What is the effect of a 100 basis point increase in interest rates on the market value of equity of the FI? Use the duration approximation relationship. Assume r = 4 percent.
a. –27.56 million.
b. –28.01 million.
c. –29.85 million.
d. –31.06 million.
e. –33.76 million.
Summary
These short questions belong to Finance and the questions are about a bank whose assets and liabilities have been given. Questions such as leverage adjusted duration gap of the bank, reducing interest rate exposure, increase of basis points on equity in markets have been answered with calculations.
Total Word Count 85
Download Full SolutionWHAT OUR STUDENTS SAY
I had spent a lot on another online assignment service provider but their quality of work left a lot to be desired and most of the time I was having to redo the whole thing on my own. So I was ending up paying a bomb without getting any results. That is when my friend told me about the great quality and affordable prices of HwA. Once I gave it a try I knew I had hit gold! My grades improved a lot and I have also got a clearer understanding of the concepts of factor markets.
Ahmed Shah Student
I must confess that I was horribly bad in logic circuit designs. I just messed up the symbols and eventually my grades hampered. But whilst browsing the net I landed on HwA and ever since I started taking their help, I never had to look back. The experience hand been fantastic and I recommend all my friends to come and take help from this website.
Anita Rogers Student
Most of my classmates where very relaxed when it was time to deliver our Research Proposal. They don’t perceive it to be important to invest time in selecting the topic. The Research Proposal writer at HwA helped me to understand the importance of choosing simpler and doable topics rather than creating challenges later during the time of conducting the research. Needless to say that I was the only one in the class to get A+ in the Research Proposal and A in the actual Research Paper.
Zhi Jie Student
My main concern was the relevant local Wellington research and reference work that was required for the final Statistics Assignment for my post graduate program at the Victoria University of Wellington. My professor was very particular about his requirement of relevant local data and samples from Wellington. With the stats assignment expert at TheReliableTutor I did not have to worry about that since the expert provided the most excellent and relevant local data and references helping me to top the class.
Shae MacMillan Student
Biochemistry was difficult to me right from the day I started to attend classes. I had problems in understanding the concepts. Then I found TheReliableTutor.com and my perspective towards the subject has completely changed. Learning became more interesting than before. Thanks to thereliabletutor.com
Jennifer Student
Comments
this is a very good website
I have 50 questions for the same test your page is showing only 28
hi can you please help or guide me to answer my assignments. thanks
hi can anyone help or guide me to my assignments. thanks
This solution is perfect ...thanks
Hello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes
Perfect bank of solution.
great !
thanks for the quick response. the solution looks good. :)
thnx for the answer. it was perfect. just the way i wanted it.
works fine.