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I need this answered in the next two hours. I will add a tip. Please provide me with detailed answers.
Use the data for City Bank to answer the following questions. Note that the Directors of City Bank have established the following policy guidelines for allowable interest rate risk:
Over a 1-year time frame, the ratio of rate sensitive assets to rate sensitive liabilities
should be between 0.85 and 1.15.
For a + 2% or -2% rate shock, economic value of equity should not fall by more than
10%.
- 1. According to GAP Analysis, what is the bank?s interest rate bet (risk exposure) over the next year? Cite specific data to support your answer.
2. Is the size of the bank?s interest rate bet within or outside policy? Provide your reasoning
3. According to earnings sensitivity analysis, is the bank asset sensitive or liability sensitive? Provide data to support your answer.
4. According to EVE analysis, what is the bank?s interest rate bet (risk exposure)? Cite specific data to support your answer.
5. Is the bank?s interest rate risk within policy? Explain.
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