PARTA The book value of DRAGON SLAYER BANK's balance sheet is listed below. The current market yield for the securities is in parentheses. The amounts are in millions. Asset Cash 6 month T-bills (4.25%) 55 50 Liability & Equity Demand deposits Savings accounts (2.0%) 100 205 100 3 month CDs (2.50%) 150 2 year personal fixed rate loan at 6.50% 3 year T bills (4.85%) 100 9 months CDs (3.85%) 350 90 540 1 year term deposit (4.0%) 3 year term deposits (4.30%) 100 230 3 year 5.5% semi-annual coupon T-notes (5.25%) 5 year 6.2% semi-annual coupon T-notes (5.75%) 5 year personal loan (11.5%, repriced yearly) 5 year bond 8.0% annual coupon issued by Thailand government with rating credit rating BBB 350 150 200 5-year bonds at 6.75% semiannual interest, balloon payment 20-year bonds at 7.5% interest, balloon payment 250 700 10 year commercial loan (12 25% repriced @ 6 months) 230 290 15-year commercial loan at 10% interest (repriced monthly) 20-year sovereign bonds 12.0% annual-coupon issued by Vietnamese government with BB rating Subordinate notes: 3-year fixed rate (5.65%) 6-year fixed rate (6.00%) 150 100 Ordinary Equity Preference shares 20 10 260 20-year mortgages at 8.5% interest (LVR 80%, no mortgage insurance), balloon payment Retained Earnings 40 Building Total Assets 150 2485 Total liability and equity 2485 Required 1. What is the cumulative repricing gap if the planning period is (a) 6 months (b) 3 year (1 + 1 marks) 2. What will happen to the net interest income of the bank, if interest on the banks rate sensitive assets is forecasted to decrease by 30 basis points and rate-sensitive liabilities to increase 50 basis points in a year' time? (4 marks) 3. Does the bank have sufficient capital to meet the risk adjusted assets requirement as per the Basle ill requirement? Please ignore the cyclical buffer requirement (8 marks) PART 3 The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at par value. Asset (mil) 2-year annual 6.45%pa coupon bond $200 Liability (Smil) $200 12-year treasury bonds coupon 5.50%p.a. $150 10-year semi-annual coupon 6.30%pa bond $350 Equity $300 6-year 3.5%pa semi-annual coupon bond 15-year treasury bond 7.5% annual coupon bond $200 $700 $700 4. Assume current market yield is flat at 3.0% p.a. What is the duration gap of the bank? (3 marks) 5. Using the duration gap estimated from question 6, what will happen to the net worth of the bank if the market yield goes up by 2.5%p.a.?. (2 marks) 6. What is the maturity gap of the bank (1 marks) PARTA The book value of DRAGON SLAYER BANK's balance sheet is listed below. The current market yield for the securities is in parentheses. The amounts are in millions. Asset Cash 6 month T-bills (4.25%) 55 50 Liability & Equity Demand deposits Savings accounts (2.0%) 100 205 100 3 month CDs (2.50%) 150 2 year personal fixed rate loan at 6.50% 3 year T bills (4.85%) 100 9 months CDs (3.85%) 350 90 540 1 year term deposit (4.0%) 3 year term deposits (4.30%) 100 230 3 year 5.5% semi-annual coupon T-notes (5.25%) 5 year 6.2% semi-annual coupon T-notes (5.75%) 5 year personal loan (11.5%, repriced yearly) 5 year bond 8.0% annual coupon issued by Thailand government with rating credit rating BBB 350 150 200 5-year bonds at 6.75% semiannual interest, balloon payment 20-year bonds at 7.5% interest, balloon payment 250 700 10 year commercial loan (12 25% repriced @ 6 months) 230 290 15-year commercial loan at 10% interest (repriced monthly) 20-year sovereign bonds 12.0% annual-coupon issued by Vietnamese government with BB rating Subordinate notes: 3-year fixed rate (5.65%) 6-year fixed rate (6.00%) 150 100 Ordinary Equity Preference shares 20 10 260 20-year mortgages at 8.5% interest (LVR 80%, no mortgage insurance), balloon payment Retained Earnings 40 Building Total Assets 150 2485 Total liability and equity 2485 Required 1. What is the cumulative repricing gap if the planning period is (a) 6 months (b) 3 year (1 + 1 marks) 2. What will happen to the net interest income of the bank, if interest on the banks rate sensitive assets is forecasted to decrease by 30 basis points and rate-sensitive liabilities to increase 50 basis points in a year' time? (4 marks) 3. Does the bank have sufficient capital to meet the risk adjusted assets requirement as per the Basle ill requirement? Please ignore the cyclical buffer requirement (8 marks) PART 3 The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at par value. Asset (mil) 2-year annual 6.45%pa coupon bond $200 Liability (Smil) $200 12-year treasury bonds coupon 5.50%p.a. $150 10-year semi-annual coupon 6.30%pa bond $350 Equity $300 6-year 3.5%pa semi-annual coupon bond 15-year treasury bond 7.5% annual coupon bond $200 $700 $700 4. Assume current market yield is flat at 3.0% p.a. What is the duration gap of the bank? (3 marks) 5. Using the duration gap estimated from question 6, what will happen to the net worth of the bank if the market yield goes up by 2.5%p.a.?. (2 marks) 6. What is the maturity gap of the bank (1 marks)
