1. Revisit the asset allocation and funding source decisions you made in Round One in light of the outcome (1 through 7) provided by your instructor BELOW.

Outcomes	Outcome Probability	Cash	One-Year U.S. Treasury Bills	Five-Year U.S. Treasury Notes	15-Year U.S. Treasury Bonds Notes
1	16.67%	No Change	No Change	No Change	No Change
2	25	No Change	0.36%	0.88%	1.86%
3	25	No Change	0.06%	0.58%	1.56%
4	13.89	No Change	No Change	0.78%	1.86%
5	13.89	No Change	No Change	0.58%	1.46%
6	2.78	No Change	0.50%	0.58%	0.75%
7	2.78	No Change	0.75%	0.68%	0.50%

(Round 1/Asset Allocation)

Balance Sheet t=0: Start of Round 1
Assets		Liabilities and Shareholders Equity
Cash	$200,000	Liabilities	$0
One-Year Treasury Bills	$100,000	Common Stock	$1,000,000
Five-Year U.S. Treasury Notes	400,000	Retained Earnings	$0
15-Year U.S. Treasury Bonds	200,000	Total Shareholders Equity	$1,000,000
Total Assets	$1,000,000	Total Liabilities and Shareholders Equity	$1,000,000

2. Based on the actual outcome at the end of t=1 and assuming all notes and bonds initially traded at par, that is, the t=0 annual rate is the coupon rate, complete the following table:

	Round One Allocation in $ (a)	Annual Rates of Return t=0 (b)	Outcome Rates t=1 (c)	Interest Income t=1 (d)	Asset Valuation t=1 (e)
Cash		0%	0%	0	= a
One-Year U.S. T-Bills		0.16%		= a x b	= a x (1+b)
Five-Year U.S. T-Notes		0.68%		= a x b	See Below
15-Year U.S. T- Bonds		1.66%		= a x b	See Below
Total	$1,000,000			$	$

3. Based on the totals above create a balance sheet at t=1. Assume no dividends, that is, all interest income is retained and that all retained earnings are held as cash.

Cash at t=1 equals Cash at t=0 plus total interest income for the period.

Securities at t=1 equal total Asset Valuation of Treasury securities at t=1.

Common Stock equals Common Stock at t=1.

Retained Earnings equal interest income in period 1 net of any gains or losses in Treasury securities.

Balance Sheet t=1: End of Round 1
Assets			Liabilities and Shareholders Equity
Cash		Total Liabilities		$0
Securities		Common Stock		$1,000,000
		Retained Earnings
		Total Shareholders Equity
Total Assets		Total Liabilities and Shareholders Equity

Of course, make sure Total Assets=Total Liabilities and Shareholders' Equity.

4. In a paragraph, discuss what caused the above changes to your bank's balance sheet.

Please let me know if the image adjustments made, based off the comments by others, were good enough to view everything. Thanks

Assuming coupon payment occur once each year, the values for the initial five-year T-Notes and 15-year T-Bonds at t-1 are calculated as follows Five-Year T-Note Value t-1 Obxa Fifteen-Year TBond Value t-1 (bxa) 1 c) 14 Assuming coupon payment occur once each year, the values for the initial five-year T-Notes and 15-year T-Bonds at t-1 are calculated as follows Five-Year T-Note Value t-1 Obxa Fifteen-Year TBond Value t-1 (bxa) 1 c) 14