Assume that the portion of fixed-rate mortgages that will mature within 1 year is 20%, portion of checkable deposits (10%), portion of savings (20%)

To prepare the presentation for the bank officers, you anticipate and answer the following questions: Show all work

1. Compute the net interest margin (NIM) for your firm for a 3% decline in interest rates. Do the same for a 3% increase in the interest rates
2. Find the gap of your firm and your competition.
3. What is the average duration for the assets and liabilities for your firm and your competition

Bank Balance Sheet Your Firm Competition Duration Amount (Smillions) Duration (years) Amount (Smillions) (years) 3 0.0 4 0.0 4 0.6 1.6 5.0 7 9 0.3 1.2 4.0 7 Assets Reserves and cash items Securities Less than 1 year 1-2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30 years) Commerical loans Less than 1 year 1-2 years Greater than 2 years Physical capital 9 15 0.4 5.5 21 17 0.9 4.4 13 31 55 10 0.9 1.8 6.0 0.0 30 22 30 25 0.6 1.4 5.4 0.0 10 5 12 1.0 0.6 1.0 14 9 16 1.0 0.5 1.0 Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1-2 years Greater than 2 years Fed funds Borrowings Less than 1 year 1-2 years Greater than 2 years 6 19 8 15 10 0.4 0.3 1.1 2.9 0.0 12 14 10 10 14 0.6 0.5 1.8 22 0.0 12 9 39 0.4 1.2 2.9 18 12 31 0.7 1.8 3.8 Bank Balance Sheet Your Firm Competition Duration Amount (Smillions) Duration (years) Amount (Smillions) (years) 3 0.0 4 0.0 4 0.6 1.6 5.0 7 9 0.3 1.2 4.0 7 Assets Reserves and cash items Securities Less than 1 year 1-2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30 years) Commerical loans Less than 1 year 1-2 years Greater than 2 years Physical capital 9 15 0.4 5.5 21 17 0.9 4.4 13 31 55 10 0.9 1.8 6.0 0.0 30 22 30 25 0.6 1.4 5.4 0.0 10 5 12 1.0 0.6 1.0 14 9 16 1.0 0.5 1.0 Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1-2 years Greater than 2 years Fed funds Borrowings Less than 1 year 1-2 years Greater than 2 years 6 19 8 15 10 0.4 0.3 1.1 2.9 0.0 12 14 10 10 14 0.6 0.5 1.8 22 0.0 12 9 39 0.4 1.2 2.9 18 12 31 0.7 1.8 3.8