Notes: Commercial paper is a pure discount instrument. The 5 year bonds pay 8.5% p.a. semiannually with a yield of 7.5% p.a. and have a duration of 4.2 years. The 1 year Certificates of Deposit pay 2.75% p.a. annually. All values are market values.

1. What is the banks debt to asset ratio?
   1. 5%
   2. 94.11%
   3. 95%
   4. 4.33
   5. 88.88%

2. What is the impact on the banks capital value if the value of the banks assets declines by 10%?
   1. No change in the banks equity value.
   2. Equity decreases to -$68 million.
   3. Equity increases to $68 million.
   4. Equity decreases to $52 million.
   5. Equity increases to $78 million.

3. What is the 6 month cumulative repricing gap?
   1. -$885 million
   2. +$885 million
   3. -$285 million
   4. +$285 million
   5. -$370 million

4. What is the impact on the banks net interest income if interest rates fall 15 basis points over the next six months?
   1. +$1.3 million
   2. -$1.3 million
   3. +$427,500
   4. -$427,500
   5. +$555,000

5. What is the banks 91 day cumulative repricing gap?

a. +$380 million

2. -$380 million
3. -$370 million
4. +$750 million
5. -$750 million

6. What is the impact on the banks net interest income if interest rates rise 5 basis points over the calendar quarter?
   1. +$375,000
   2. -$375,000
   3. +$190,000
   4. -$190.000
   5. -$750,000

7. The banks interest rate exposure is:
   1. lower in the short term because the 91 day repricing gap is larger than the six month repricing gap.
   2. higher in the short term because the 91 day repricing gap is smaller than the six month repricing gap.
   3. lower in the short term because the absolute value of the six month repricing gap is larger than the absolute value of the 1 year repricing gap.
   4. higher in the short term because the absolute value of the six month repricing gap is smaller than the absolute value of the 1 year repricing gap.
   5. equal in both the short and long term.

8. How can the bank reduce its interest rate risk exposure over the next six months?
   1. Increase rate sensitive assets.
   2. Decrease rate sensitive assets.
   3. Increase rate sensitive assets and decrease rate sensitive liabilities.
   4. Decrease rate sensitive assets and increase rate sensitive liabilities.
   5. Increase rate sensitive liabilities.

9. What is the duration of the floating rate mortgages?
   1. 0.25 years
   2. 10 years
   3. 2 years
   4. 0.5 years
   5. There is not enough information to answer the question.

10. What is the duration of the 1 year Certificates of Deposit if they pay 2.75% p.a. interest, compounded annually?
    1. 0.25 years
    2. 1 year
    3. 2 years
    4. 0.5 years
    5. There is not enough information to answer the question.

($ million) Liabilities: 1 year Certificates of Deposit $ 825m 5 year Bonds 70m Bank of Baruch Assets: 91 day US Treasury bills $ 150m 2 year commercial loans $ 75m Fixed rate, 9% p.a. annually 10 year corporate loans-floating rate: LIBOR+50bp, semiannual roll date $ 505m 10 year floating rate mortgages quarterly roll dates $ 600m Overnight Fed Funds 91-day Commercial Paper Equity 100m 270m 65m ($ million) Liabilities: 1 year Certificates of Deposit $ 825m 5 year Bonds 70m Bank of Baruch Assets: 91 day US Treasury bills $ 150m 2 year commercial loans $ 75m Fixed rate, 9% p.a. annually 10 year corporate loans-floating rate: LIBOR+50bp, semiannual roll date $ 505m 10 year floating rate mortgages quarterly roll dates $ 600m Overnight Fed Funds 91-day Commercial Paper Equity 100m 270m 65m