Assignment
The following balance sheet information is available (amounts in thousands of dollars and duration in years) for a financial institution:
|
Amount Duration
|
|
T-bills
|
$90
|
0.5
|
|
T-notes
|
55
|
0.9
|
|
T-bonds
|
176
|
x
|
|
Loans
|
2,724
|
7
|
|
Deposits
|
2,092
|
1
|
|
Federal funds
|
238
|
0.01
|
|
Equity
|
715
|
|
Treasury bonds are five-year maturities paying 6 percent semiannually and selling at par.
a. What is the duration of the T-bond portfolio?
b. What is the average duration of all the assets?
C. What is the average duration of all the liabilities?
d. What is the leverage adjusted duration gap? What is the interest rate risk exposure?
e. What is the forecasted impact on the market value of equity caused by a relative upward shift in the entire yield curve of 0.5 percent [i.e.,?R/ (1 + R) = 0.0050]?
f. If the yield curve shifts downward 0.25 percent [i.e., ?R/ (1 + R) =-0.0025], what is the forecasted impact on the market value of equity?
g. What variables are available to the financial institution to immunize the balance sheet? How much would each variable need to change to get DGAP to equal 0?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.