Solution Library

Calculation of Net Interest Income Of Bank Based On Increase In Basis Points And Maturity Gap Repricing

Question The following is the balance sheet of Boston Bank. The average maturity of demand deposits is estimated at 2 years.  Assets Amount ($ millions) Annual Rate Liabilities Amount ($ millions) Annual Rate 1-year bonds $60 7 % 1- ... Read More

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Calculation Of Change In Assets, Liabilities And Equity of Bank On Change In Interest Rates

Question All assets and liabilities are currently priced at par and pay interest annually. Assets Amount ($ millions) Annual Rate Liabilities Amount ($ millions) Annual Rate 2-year loans $40 8 % 5-year term deposit $30 6 % ... Read More

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Calculation Of Leverage Adjusted Gap Between Assets and Liabilities And Loan Amortization

Question1. An FI has financial assets of $800 and equity of $50. If the duration of assets is 1.21 years and the duration of all liabilities is 0.25 years, what is the leverage-adjusted duration gap?    a.    0.9000 years.    b.    0.9600 y ... Read More

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Duration Of Bond and Change In Price of Bonds Calculations

Question1. An FI purchases a $9,982 million pool of commercial loans at par. The loans have an interest rate of 8 percent, a maturity of five years, and annual payments of principal and interest that will exactly amortize the loan at maturity. What is the duration of this asset?    a. ... Read More

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Calculation Of Leverage Adjusted Duration Gap Impact On Equity

QuestionAn FI has a leverage-adjusted duration gap of 1.21 years, $60 million in assets, 7 percent equity to assets ratio, and market rates are 8 percent. What is the impact on the dealer's market value of equity per $100 of assets if the relative change in all interest rates is an increase of 0.5 p ... Read More

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Calculation of Change in Price of Bond With Changes in Market Interest Rates

QuestionConsider a one-year maturity, $100,000 face value bond that pays a 6 percent fixed coupon annually.1. What is the price of the bond if market interest rates are 7 percent?    a. $99,050.15.    b. $99,457.94.    c. $99,249.62.    d. ... Read More

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Taxable Income, Current Income Tax Expense, Deferred Income Tax Calculation

QuestionSnarley Corp. had the following balances in selected accounts as of January 1, 2013:Accrued Warranty Liability            1,500 creditAccumulated Depreciation        225,000 creditDeferred Tax Asset – AWL & ... Read More

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Periodic Review Policies Required for Maintaining Inventory Level

QuestionBased on the Music Today case, do periodic review policies require more safety inventory, less safety stock, or the same safety stock than continuous review policies for the same level of product availability and the same amount of inventory replenishment lead time? Please state and justify ... Read More

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Financial Position Evaluation Of A Company

QuestionUsing copies of the Annual Financial Reports & Accounts for Severn Trent (they are available online at Yahoo finance, MSN finance or the company’s website), evaluate:a.    Whether the company in a position to issue debt securities or should it consider issuing equity ... Read More

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Preparing Bullet Bond Price For A Company

QuestionYou have won the mandate and Severn Trent PLC has asked you price a 5 year GBP par bullet bond issue for them, with Price, Coupon, Yield to Maturity and Modified Duration. You have the following set of UK Treasury bond data (March 2013) and consultations with your Bank’s Equity Analyst ... Read More

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Royalty Calculation For Sale Of Books

QuestionEileen O'Donnell is trying to choose between two publishing companies that are competing for the marketing rights to her new novel. Company A has offered $10,000 plus $2 per book sold. Company B has offered $2,000 plus $4 per book sold. The author believes that five levels of demand (states ... Read More

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NPV Calculation for Projects If They Are Infinitely Divisible

QuestionTiger plc has the following projects:Projects Initial Investment,      £ NPV (after tax)A 100,000                           &n ... Read More

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