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Consider the following two banks: 4 Bank 1 has assets composed solely of a 10-year, 11.00 percent coupon, $1.2 million loan with a 11.00 percent
Consider the following two banks: 4 Bank 1 has assets composed solely of a 10-year, 11.00 percent coupon, $1.2 million loan with a 11.00 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $1.2 million CD with a 10 percent yield to maturity. 10 points Bank 2 has assets composed solely of a 7-year, 11.00 percent, zero-coupon bond with a current value of $997,229.29 and a maturity value of $2,070,407.72. It is financed by a 10-year, 7.25 percent coupon, $1,200,000 face value CD with a yield to maturity of 10 percent. All securities except the zero-coupon bond pay interest annually. eBook 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)) Print Asset Value Liabilities Value After Interest Rise Difference Before Interest Rise After Interest Rise Difference References Bank 1 Before Interest Rise $ 1,200,000.00 $ 997,229.29 1,200,000.00 Bank 2
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