Question
A bank has made a $10 million loan with no prepayment penalties at a rate of T-Bill (3-month) + 10%, reset every six months. It
A bank has made a $10 million loan with no prepayment penalties at a rate of T-Bill (3-month) + 10%, reset every six months. It is funded by wholesale deposits procured at T-Bill (3-month) + 5%, reset every six months. What interest rate risk does the bank face?
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The bank faces interest rate risk due to the mismatch between the loan and deposit rates which are b...
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Financial Markets and Institutions
Authors: Jeff Madura
12th edition
9781337515535, 1337099740, 1337515531, 978-1337099745
