Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

the above values are book values and should be converted into market value The following is the balance sheet of a VRY-SMPL Bank. All the

image text in transcribed

the above values are book values and should be converted into market value

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 $200 Liability ($mil) $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 $700 4. Assume current market yield is flat at 3.0% p.a. What is the duration gap of the bank? (3 marks) 5. Using the duration gap estimated from question 6, what will happen to the net worth of the bank if the market yield goes up by 2.5%p.a.?.. (2 marks) 6. What is the maturity gap of the bank (1 marks) The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at par value. Asset ($mil) 2-year annual 6.45%pa coupon bond $200 Liability ($mil) $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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Inside Private Equity

Authors: James M. Kocis, James C. Bachman IV, Austin M. Long III, Craig J. Nickels

1st Edition

0470421894, 978-0470421895

More Books

Students also viewed these Finance questions

Question

Define the goals of persuasive speaking

Answered: 1 week ago