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Bank 1 has assets composed solely of a 10 -year, 11.00 percent coupon, $1.8 million loan with a 11.00 percent yield to maturity. It is
Bank 1 has assets composed solely of a 10 -year, 11.00 percent coupon, $1.8 million loan with a 11.00 percent yield to maturity. It is financed with a 10 -year, 10 percent coupon, $1.8 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 11.00 percent, zero-coupon bond with a current value of $1,164,037.30 and a maturity value of $2,416,727.86. It is financed by a 10 -year, 4.25 percent coupon, $1,800,000 face value CD with a yield to maturity of 10 percent. All securities except the zero-coupon bond pay interest annually. a. If interest rates rise by 1 percent ( 100 basis points), what is the difference in the value of the assets and liabilities of each bank? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter the answers in dollars, not millions of dollars. Round your answers to 2 decimal places. (e.g., 32.16))
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