Assignment
1. The balance sheet of XYZ Bank appears below. All figures in millions of US Dollars.
a. Calculate total one-year rate-sensitive assets.
b. Calculate total one-year rate-sensitive liabilities.
c. Calculate one-year repricing GAP for the bank.
d. Suppose that interest rates rise by 2 percent on both RSAs and RSLs. What would be the expected annual change in net interest income of the bank?
2. A government bond currently carries a yield to maturity of 6 percent and a market price of $1,168.49. If the bond promises to pay $100 in interest annually for five years, what is its current duration?
3. Suppose that you purchase a bond that matures in five years and pays a 13.76% coupon rate annually. The bond is priced to yield 10%. What's the duration?
4. A $1,000 par value bond with five years left to maturity pays an interest payment semiannually with a 6% coupon rate and is priced to have a 5% yield to maturity. If interest rates surprisingly increase by 0.5%, by how much would the bond's price change?
5. Suppose that a savings institution has an average asset duration of 2.5 years and an average liability duration of 3.0 years. If the savings institution holds total assets of $560 million and total liabilities of $467 million, does it have a significant leverage-adjusted duration gap? If interest rates rise, what will happen to the value of its net worth?
6. Why do we need to make a convexity adjustment to estimate a bond's percentage price change with respect to a given change in interest rates?
7. Blue Moon National Bank holds assets and liabilities whose average durations and dollar amounts are as shown in this table:
|
Asset and Liability Items
|
Avg. Duration (years)
|
Dollar Amount (millions)
|
|
Investment Grade Bonds
|
15.00
|
$65.00
|
|
Commercial Loans
|
3.00
|
$400.00
|
|
Consumer Loan
|
7.00
|
$250.00
|
|
Deposits
|
1.25
|
$600.00
|
|
Nondeposit Borrowings
|
0.50
|
$50.00
|
a. What is the weighted average duration of Blue Moon's asset portfolio and liability portfolio, respectively?
b. What is the leverage-adjusted duration gap?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Assignment-Data.rar