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Solution Library
Calculate Weighted Average Duration Of Assets And Liabilities Of A 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. The short-term debt consists of 4-year bonds paying an annual coupon of 4 percent and selling at par. What is the duration of the short-term debt?
a. 3.28 years.
b. 3.53 years.
c. 3.78 years.
d. 4.03 years.
e. 4.28 years.
2. What is the weighted average duration of the assets of the FI?
a. 7.25 years.
b. 7.75 years.
c. 8.25 years.
d. 8.75 years.
e. 9.25 years.
3. What is the weighted average duration of the liabilities of the FI?
a. 5.00 years.
b. 5.35 years.
c. 5.70 years.
d. 6.05 years.
e. 6.40 years.
Summary
These short questions belong to Finance and the questions are about a bank whose assets and liabilities have been given. Questions such as duration of short term debt, weighted average duration of assets and weighted average duration of liabilities of the bank have been calculated in the solution.
Total Word Count 130
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