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Onesti 4 A bank faces certainty of liquidity needs which we represented by deposit wildwas following a soma distration with mean of $2 million and
Onesti 4 A bank faces certainty of liquidity needs which we represented by deposit wildwas following a soma distration with mean of $2 million and standard deviation of $12 million of the spread (-)-$29%, and penalty of liquidity shortage -15% How much should the bank set aside its cash reserve to cope with the liquidity risk? (Note U. EXCEL) 13 Oestions Use the following to answer Questions 5.1.5.15 Bank Business millis) Assets Liabilities 91 day Treasury bills $ 150m 1 year Certificates of Deposit $825m 2 ye mercial los 5 75m 5 year Bands $ 70m fixed rate, 946 Demand deposits $ 50m 10 year corporate loans floating rate: Ovemight borrowing $ 50m LIBORSCop, semiannual roll date 91 day Commercial Paper $ 270m som Equity $ 65m 10 year floating rate mortgages quarterly roll dates $ 600m Cash $ Sm Notes: Commercial paper is a pure discount instrument. The 5 year bonds pay 8.5% pa semi- annually with a yield of 75% pa. and have a duration of 4.2 years. The 1 year Certificates of Deposit pay 2.75% pa. annually. All securities will be rolled over at maturities. All values are market values pe 5.1 What is the bank's liability to asset ratio? 52 What is the maximum amount of loss in the bank's lending activities before a bank run will occur? 5.4 What is the bank's 91 day cumulative repricing dollar gap! What is the impact on the bank's net interest income if interest rates rise 5 basis points over the calendar quarter 5.5 What is the 6 month cumulative repricing dollar gap? the next How can the bank eine interest rate exposure over the next months via direct refinancing which involves equal amount o ide of the alance sheet And what is the dollar amount moved in each of the What is the darwion of the floating rate more 50 What is the duration of the year Certificates of Deposit if they pay 2.794 internet, compounded annually 5 10 What is the duration of the year commercial loans if they are selling par? (Asume anal coupon payments 511 What is the duration of the bank's assets. D. 512 What is the duration of the bank's liabilities, 3.13 What is the bank's duration gp D 514 What is the impact on the bank's equity values if interest rates decrease 50 basis points from $92 515 How is this bank exposed to lie to falling or rising interest rate changes)? How can the bank use direct refinancing to restructure the maturities of its assets orland liabilities that would modify the Do and reduce its exposure to interest rate changes? Question 6 A bank wants to use direct refinancing to manage its duration gap. De Currently for its assets, Loans - 522 million and Cash $6 million Equity - S4 million. Average DA -2.75 yrs, and average D-4 yrs. Should the bank buy loans with cash or sell existing lows for cash to reduce its interest rate risk? 6.2 What is the duration of the bank's existing loans? 63 How much cash will be used to eliminate the bank's interest rate exposure, if the loen available on the market has a duration of 7.6 years? Onesti 4 A bank faces certainty of liquidity needs which we represented by deposit wildwas following a soma distration with mean of $2 million and standard deviation of $12 million of the spread (-)-$29%, and penalty of liquidity shortage -15% How much should the bank set aside its cash reserve to cope with the liquidity risk? (Note U. EXCEL) 13 Oestions Use the following to answer Questions 5.1.5.15 Bank Business millis) Assets Liabilities 91 day Treasury bills $ 150m 1 year Certificates of Deposit $825m 2 ye mercial los 5 75m 5 year Bands $ 70m fixed rate, 946 Demand deposits $ 50m 10 year corporate loans floating rate: Ovemight borrowing $ 50m LIBORSCop, semiannual roll date 91 day Commercial Paper $ 270m som Equity $ 65m 10 year floating rate mortgages quarterly roll dates $ 600m Cash $ Sm Notes: Commercial paper is a pure discount instrument. The 5 year bonds pay 8.5% pa semi- annually with a yield of 75% pa. and have a duration of 4.2 years. The 1 year Certificates of Deposit pay 2.75% pa. annually. All securities will be rolled over at maturities. All values are market values pe 5.1 What is the bank's liability to asset ratio? 52 What is the maximum amount of loss in the bank's lending activities before a bank run will occur? 5.4 What is the bank's 91 day cumulative repricing dollar gap! What is the impact on the bank's net interest income if interest rates rise 5 basis points over the calendar quarter 5.5 What is the 6 month cumulative repricing dollar gap? the next How can the bank eine interest rate exposure over the next months via direct refinancing which involves equal amount o ide of the alance sheet And what is the dollar amount moved in each of the What is the darwion of the floating rate more 50 What is the duration of the year Certificates of Deposit if they pay 2.794 internet, compounded annually 5 10 What is the duration of the year commercial loans if they are selling par? (Asume anal coupon payments 511 What is the duration of the bank's assets. D. 512 What is the duration of the bank's liabilities, 3.13 What is the bank's duration gp D 514 What is the impact on the bank's equity values if interest rates decrease 50 basis points from $92 515 How is this bank exposed to lie to falling or rising interest rate changes)? How can the bank use direct refinancing to restructure the maturities of its assets orland liabilities that would modify the Do and reduce its exposure to interest rate changes? Question 6 A bank wants to use direct refinancing to manage its duration gap. De Currently for its assets, Loans - 522 million and Cash $6 million Equity - S4 million. Average DA -2.75 yrs, and average D-4 yrs. Should the bank buy loans with cash or sell existing lows for cash to reduce its interest rate risk? 6.2 What is the duration of the bank's existing loans? 63 How much cash will be used to eliminate the bank's interest rate exposure, if the loen available on the market has a duration of 7.6 years
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