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Institution has the following Balance Sheet. The rate of return and costs on the accounts are also given. The Variable Rate securities re-price annually and
Institution has the following Balance Sheet. The rate of return and costs on the accounts are also given. The Variable Rate securities re-price annually and the Fixed Rate securities have a maturity of 5 years. Non-Earning Assets are PP&E and Goodwill. ASSETS: LIABILITIES & EQUITY: Variable Rate Liabilities at 3% | Fixed Rate Liabilities at 5% Equity TOTAL LIABILITIES& S 200.000 600,000 120,000 | S Variable Rate Assets at 4% Fixed Rate Assets at 6% Non-Earning Assets 100,000 700,000 120,000 920,000 TOTAL ASSETS S EQUITY The expected Net Interest Income is S10,000 based on the information above. decre inaies resuled in $8,00 eeced Net eres ncome, 2.00 Based on the above information, explain the swap the institution should set up to hedge its interest rate risk. What is the swap type and why? What should be the notional amount of this swap contract and why? a. PS With detait nd equations if't aplicable, piease My gol is to the answer. Institution has the following Balance Sheet. The rate of return and costs on the accounts are also given. The Variable Rate securities re-price annually and the Fixed Rate securities have a maturity of 5 years. Non-Earning Assets are PP&E and Goodwill. ASSETS: LIABILITIES & EQUITY: Variable Rate Liabilities at 3% | Fixed Rate Liabilities at 5% Equity TOTAL LIABILITIES& S 200.000 600,000 120,000 | S Variable Rate Assets at 4% Fixed Rate Assets at 6% Non-Earning Assets 100,000 700,000 120,000 920,000 TOTAL ASSETS S EQUITY The expected Net Interest Income is S10,000 based on the information above. decre inaies resuled in $8,00 eeced Net eres ncome, 2.00 Based on the above information, explain the swap the institution should set up to hedge its interest rate risk. What is the swap type and why? What should be the notional amount of this swap contract and why? a. PS With detait nd equations if't aplicable, piease My gol is to the
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