Question
The following is the balance sheet of Boston Bank. The average maturity of demand deposits is estimated at 2 years.
|
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Face Value
|
Runoff < 1 year
|
|
Face Value
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Runoff < 1 year
|
|
3-mo. T-Bills
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$60m
|
|
Demand Dep.
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$180m
|
10 percent
|
|
2-yr Bonds
|
$60m
|
5 percent
|
Equity
|
$20m
|
|
|
5-yr Bonds
|
$80m
|
10 percent
|
|
|
|
1. What is the repricing gap if a 0 to 3 month maturity gap is used? Ignore runoffs.
a. $60 million.
b. $40 million.
c. -$80 million.
d. -$120 million.
e. -$180 million.
2. What is the repricing gap if a 3-year maturity gap is used? Ignore runoffs.
a. $21 million.
b. $44 million.
c. -$80 million.
d. -$60 million.
e. -$120 million.
3. What is the repricing gap if a 1-year maturity gap is used if runoffs are also considered?
a. -22 million.
b. +$22 million.
c. +$53 million.
d. -$40 million.
e. -$70 million.
4. What is the impact on net interest income in year two if interest rates increase by 50 basis points at the end of year one? Ignore runoffs.
a. +$0.210 million.
b. +$0.300 million.
c. -$0.300 million.
d. -$0.210 million.
e. +$0.600 million.
Summary of problem:
This question is from Finance as well as it is about computation of repricing maturity gap for 0-3 months, 3 years, 1 year and the impact on net interest income for the bank. These have been calculated in the solution in detail.