sub= 24 help Suppose you are the manager of a bank whose $150 billion of assets have an average duration of six years and whose $130 billion of liabilities havean average duration of five years. Conduct a duration analysis for the bank, and show what will happen to the net worth of the bank if interest ratesrise by 3 percentage points.The assetsin value by Sbillion. (Round your response to one decimal place.)The liabilitiesV in value by $ billion. (Round your response to one decimal place.)The net worth of the bankV by $ billion. (Round your response to one decimal place.)What action will not reduce the bank's interest-rate risk?O A. Swapping the interest earned on the assets with the interest on another bank's assets that have a duration of five years.O B. Lengthening the maturity of the liabilities to a duration of six years.O C. Lenghtening the maturity of the assets to a duration of eleven years.O D. Shortening the maturity of the assets to a duration of five years.

Interest is the return which a depositor or a bank gets from the amount of loan which has been given…

Answered: The assets in value by $billion. (Round…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter11: Determining The Cost Of Capital

Section: Chapter Questions

Problem 16P

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Suppose you are the manager of a bank that has$15 million of fixed-rate assets, $30 million of ratesensitive assets, $25 million of fixed-rate liabilities,and $20 million of rate-sensitive liabilities. Conduct agap analysis for the bank, and show what will happento bank profits if interest rates rise by 5 percentagepoints. What actions could you take to reduce thebank’s interest-rate risk?
You manage a bank that has $500 million of fixed-rate assets, $600 million of rate-sensitive assets, $1000 million of fixed-rate liabilities, and $100 million of rate-sensitive liabilities. A. Do a gap analysis and show what will happen to bank profits if interest rates rise by 4%. Show your work. B. What happens to the bank’s profits if interest rates fall by 7%?
A bank has an average asset duration of 5 years and an average liability duration of 3 years.This bank has total assets of $500 million and total liabilities of $250 million. Currently,market interest rates are 10 percent. If interest rates fall by 2 percent (to 8 percent), what isthis bank's change in net worth?6A. Net worth will decrease by $31.81 million.B. Net worth will increase by $31.81 million.C. Net worth will increase by $27.27 million.D. Net worth will decrease by $27.27 million.
Oldhat Financial starts its first day of operations with â$12 million in capital. A total of â$140 million in checkable deposits are received. The bank makes a â$25 million commercial loan and another â$60 million inâ mortgages, with the followingâ terms: 200 standard 30â-year, âfixed-rate mortgages with a nominal annual rate ofâ 5.25%, each for â$300, 000. Assume that required reserves are 8â%.(a) What does the bank balance sheet look like?(b) How well capitalized is the bank?
You are valuing a bank. The bank currently has assets of $320 per share. Five years from now (that is, at the end of five years), you expect their assets per share to be $460. After Year 5. you expect their assets per share to grow at 3.5 percent per year forever. The bank has an ROA of 1.6 percent and an ROE of 12.0 percent. The bank's cost of equity is 11.0 percent. What is the value of the bank's stock? Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.
A bank invested $50 million in a two-year asset paying 10 percent interest per year and simultaneously issued a $50 million, one-year liability paying 8 percent interest per year to pay for it. • Is the bank short funded or long funded? • What is the bank’s net interest income in year one? • What will be the bank’s net interest income in year two if at the end of the first year all interest rates have decreased by 1.5 percent (150 basis points)?
You are the manager of a bank that has $15 million in fixed-rate assets, $30 million in rate-sensitive assets, $25 million in fixed-rate liabilities, and $20 million in rate-sensitive liabilities. Conduct a gap analysis for the bank, and show what would happen to bank profits if interest rates rise by 5 percentage points. What could management do to reduce interest-rate risk?
The Tropical State Bank has $1,000 in total assets (all of which are earning assets), $700 ofwhich will be repriced within the next 90 days. This bank also has $800 in total liabilities,$400 of which will be repriced within the next 90 days. Currently, the bank is earning 8percent on its assets and is paying 5 percent on its liabilities.If interest rates on both assets and liabilities rise by 2 percent in the next 90 days, what would be thebank's net interest margin?A. 4 percentB. 4.4 percentC. 4.6 percentD. 2.4 percent
A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 15-year duration, and $19 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? A) 3.95 years B) 6.16 years C) 6.50 years D) 7.38 years E) 11.51 years
Suppose that the liabilities of "Bank X" are all demand deposits and 3-month time deposits. Meanwhile, the bank's main assets are 5-year term loans to corporations with BB credit ratings. The loan interest rates are fixed for five years. Briefly describe the risks which Bank X is exposed to
A bank has three assets. It has $75 million invested in consumer loans with a three-year duration, $39 million invested in T-bonds with a 16-year duration, and $39 million in six-month maturity T-bills. What is the duration of the bank's asset portfolio in years? Group of answer choices 11.51 years 7.38 years 3.95 years 5.68 years
Suppose that the assets of a bank consists of $100 million of loans to A rated corporations. The PD for the corporations is estimated as 0,1% and LGD is 60%. The average maturity is 2.5 years for corporate loans. What is RWA?.

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