16. | If interest rates decrease 50 basis points for an FI that has a gap of +$5 million, the expected change in net interest income is E. $ 25,000 | - . | | Hadbucks National Bank current balance sheet appears below. All assets and liabilities are currently priced at par and pay interest annually. | 17. | What is the weighted average maturity of assets? | 18. | What is the weighted average maturity of liabilities? | 19. | What is this FI's maturity gap? | 20. | What is market value of the one-year bond if all market interest rates increase by 2 percent? | 21. | The greater is convexity, the more insurance a portfolio manager has against interest rate increases and the greater potential gain from rate decreases. True False | 22. | A $1,000 six-year Eurobond has an 8 percent coupon, is selling at par, and contracts to make annual payments of interest. The duration of this bond is 4.99 years. What will be the new price using the duration model if interest rates increase to 8.5 percent? | | Consider a one-year maturity, $100,000 face value bond that pays a 6 percent fixed coupon annually. | | First Duration Bank has the following assets and liabilities on its balance sheet | 23. | What is the duration of the commercial loans? | 24. | What is the FI's leverage-adjusted duration gap? | 25. | The Volker Rule is intended to reduce market risk at depository institutions. True False | 26. | The Value at Risk (VAR) provides information about the potential size of the expected loss given a level of probability. True False | 27. | The Expected Shortfall (ES) is a measure of market risk that estimates the expected losses beyond a given confidence level. True False | 28. | Daily earnings at risk (DEAR) is calculated as A. | the price sensitivity times an adverse daily yield move. | B. | the dollar value of a position times the price volatility. | C. | the dollar value of a position times the potential adverse yield move. | D. | the price volatility times the N. | E. | More than one of the above is correct. | | | The mean change in the value of a portfolio of trading assets has been estimated to be 0 with a standard deviation of 20 percent. Yield changes are assumed to be normally distributed. | 29. | What is the maximum yield change expected if a 90 percent confidence (one-tailed) limit is used? | | City bank has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the bonds is 10 percent. | 30. | What is the modified duration of these bonds? | 31. | What is the price volatility if the maximum potential adverse move in yields is estimated at 20 basis points? | 32. | What is the daily earnings at risk (DEAR) of this bond portfolio? | 33. | What is the 10-day VAR assuming the daily returns are independently distributed? | | | |