A bank has issued a one-year certifi cate of deposit for $50 million at an interest rate
Question:
A bank has issued a one-year certifi cate of deposit for $50 million at an interest rate of 2 percent. With the proceeds, the bank has purchased a two-year Treasury note that pays 4 percent interest. What risk does the bank face in entering into these transactions? What would happen if all interest rates were to rise by 1 percent?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Money Banking And Financial Markets
ISBN: 9780073375908
3rd Edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
Question Posted: