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NEED HELP WITH E-2 AND E-3 Use the data provided for Gotbucks Bank, Inc., to answer this question. Notes to the balance sheet: Currently, the
NEED HELP WITH E-2 AND E-3
Use the data provided for Gotbucks Bank, Inc., to answer this question. Notes to the balance sheet: Currently, the fed funds rate is 8.9 percent. Variable-rate loans are priced at 5 percent over LIBOR (currently at 12 percent). Fixed-rate loans are selling at par and have five-year maturities with 13 percent interest paid annually. Assume that fixed rate loans are non-amortizing. Core deposits are all fixed rate for two years at 9 percent paid annually. Euro CDs currently yield 10 percent. a. What s the duration of Gotbucks Bank's (GBI) fixed-rate loan portfolio if the loans are priced at par? b. If the average duration of GBI's floating-rate loans (including fed fund assets) is .40 year, what is the duration of the bank's assets? c. What is the duration of GBI's core deposits if they are priced at par? d. If the duration of GBI's Euro CDs and fed fund liabilities is .405 years, what is the duration of the bank's liabilities? e. What is GBI's duration gap? e. What is the expected change in equity value if all yields increase by 100 basis points? e. Given the equity change in e-2. what is the expected new market value of equity after the interest rate changeStep by Step Solution
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