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American Bank current balance sheet appears below. All assets and liabilities are currently priced at par and pay interest annually. Assets Amount (S Annual Rate
American Bank current balance sheet appears below. All assets and liabilities are currently priced at par and pay interest annually. Assets Amount (S Annual Rate Liabilities Amount ($ Annual Rate millions) millions) 1-year bonds $60 7% 1-year CD $50 10-year loan $40 12%2-year CD $40 Equity $10 Total $100 $100 Total a. What is the weighted average maturity of assets? b. What is the weighted average maturity of liabilities? c. What is this FI's maturity gap? d. What is market value of the two-year CD if all market interest rates increase by 2 percent? e. What is the impact on the FI's equity of a 2 percent overall increase in market interest rates on all fixed-rate instruments? Briefly discuss your results
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