4.Notes to the balance sheet: Currently, the fed funds rate is 10.3 percent. Variable-rate loans are priced at 4 percent over LIBOR (currently at 11 percent). Fixed-rate loans are selling at par and have five-year maturities with 12 percent interest paid annually. Assume that fixed rate loans are non-amortizing. Core deposits are all fixed rate for two years at 8 percent paid annually. Euro CDs currently yield 9 percent.

5.An insurance company issued a $108 million one-year, zero-coupon note at 8 percent add-on annual interest (paying one coupon at the end of the year) and used the proceeds plus $28 million in equity to fund a $136 million face value, two-year commercial loan at 6 percent annual interest. Immediately after these transactions were (simultaneously) undertaken, all interest rates went up 1.5 percent.