Provide the new level of equity capital ways to minimize


Given the information: (all numbers are in millions of U.S. dollars)

Saving account deposits $3

Variable rate loans $20

30 year bonds $5

Fed funds lending $2

Money market deposit accounts $9

10 year treasury notes $16

Variable rate CD’s $10

Reserves $2

Demand deposits $22

Fixed rate loans $8

Equity capital $9

a. Correctly construct the bank balance sheet into 4 quadrants as illustrated in class.

b. Perform a standard Gap analysis and a duration analysis using the above data if you have a 2.7% decrease in interest rates with an average duration of 9.3 years on your assets and 7.7 years on your liabilities.

c. Provide the new level of equity capital.

d. Ways to minimize interest rate risk?

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Financial Management: Provide the new level of equity capital ways to minimize
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