Question
Question 3 The Balance Sheet of Hedge Row Bancorp (In Millions) is provided below. Asset Amount Liability & Equity Amount Cash (Non-Interest Earning) 10.0 Demand
Question 3
The Balance Sheet of Hedge Row Bancorp (In Millions) is provided below.
Asset | Amount | Liability & Equity | Amount |
Cash (Non-Interest Earning) | 10.0 | Demand Deposit (One-Year Maturity) | 70 |
Short Term Consumer Loan (One-year Maturity) | 140 | Demand Deposit (Two-year Maturity) | 40 |
Long Term Consumer Loan (Two-Year Maturity) | 150 | Three-Month Certificate of Deposits (CDs) | 140 |
Three-Month Treasury Bills | 145 | Three-Month Bankers Acceptances | 100 |
Six-Month Treasury Notes | 110 | Six-Months Commercial Paper | 155 |
Five-year Treasury Bond | 85 | One-Year Time Deposit | 195 |
10 Year, Fix Rate Mortgages | 120 | Two-Year Time Deposits | 170 |
30-Year, floating-Rate Mortgages (Rate Adjusted every nine months) | 230 | Equity Capital (Fixed) | 120 |
Total Assets | 990 | Total Liability & Equity | 990 |
- Calculate the cumulative one-year repricing gap (CGAP) for Hedge Row Bancorp.
- Based on the answer from a) explain which risk Hedge Row Bancorp would be exposed to.
- Calculate the Cumulative one-year impact on net interest income of Hedge Row Bancorp of a 1% (125 basis points) increase in interest rates on both rate sensitive assets and rate-sensitive liabilities.
- The weighted average Duration of the assets of Hedge Row Bancorp is calculated at 3.6 years, while the weighted-average duration of its liabilities is calculated at 2.8 years. The market value of the liabilities equates to the book value. With interest rate expected to rise from 9% to 10%.
- Calculate the potential impact on the market value of the equity of Hedge Row Bancorp.
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