Interest Rate and Security Value

Consider the following two banks:

1) Bank 1 has assets composed solely of a 10-year, 12% coupon, $1 million loan with a 12% YTM. It is financed with a 10-year, 10% coupon, $1 million CD with a 10% YTM.

2) Bank 2 has assets composed solely of a 7-year, 12% yield, zero-coupon bond with a current value of $894,006.2 and a maturity value of $1,976,362.88. It is financed by a 10-year, 8.275% coupon, $1 million face value CD with a 10% YTM.

~ If interest rate rises by 1%, how do the values of assets and liabilities of EACH bank change

Bank 1						Bank 2
	old rate	new rate	change in PV ($)	% change in PV			old rate	new rate	change in PV ($)	% change in PV
Asset	($1,000,000.00)	($945,737.57)				Asset
Liabilities						Liabilities

Instructions Problem 1 Problem 2 Problem 3 Please show all your work in order to receive credits. You can show the calculations by listing how you input in a financial calculator, or use Excel. Grading is based on effort