1. With respect to convexity, the lower the coupon rate, the lower the convexity (true or false) 2. Capital bank has interest income of $4,250 million and interest expense of $3,175 million. Net equity for the bank is $25,000 million and total liabilities are $42,000 million. What is the net interest margin for the bank? a. 6.34% b. 4.30% c. 2.56% d. 1.60% e. 17.00% 3. If interest rates jumped from 4% two 4.25%, by how much will Treasure bond future contracts change if the treasury bond has a duration of 9.5 years and contracts are quoted at 125-12? a. -$2,857 b. $2,857 C. -$2,863 d. $2,863 e. $3,128 4 Most banks have positive convexity (true or false) 5. Hartford bank needs to borrow $425 million by selling monthly time deposits with 180-day maturities. If comparable deposit rates are 2.25%, what is the cost of issuing these deposits? a. $9,562,500 b. $1,593,750 c. $885,417 d. $796,875 e. $318,750 6. Which of the following is not a method for measuring Asset-Liability Gap Analysis? a. The credit spread method b. The repricing models C. The maturity models d. The duration models e. All of the above 7. Access bank intends to purchase home mortgages with a target return of 6.5%. the bank is concerned that rates will drop, and the cost of the portfolio will rise from the current $50 million price. In 3-months rates are expected to be at 5% and treasury bonds options are quoted at $110,000 with a premium of $800 and the forecast to fall to $95,000. Should access bank buy puts or calls, and what is the pre-tax profit/loss per contract? a. Call, -$14,200 b. Put, $14,200 C. Call, $14,200 d. Put, $14,200 e. Cannot be determined 1. With respect to convexity, the lower the coupon rate, the lower the convexity (true or false) 2. Capital bank has interest income of $4,250 million and interest expense of $3,175 million. Net equity for the bank is $25,000 million and total liabilities are $42,000 million. What is the net interest margin for the bank? a. 6.34% b. 4.30% c. 2.56% d. 1.60% e. 17.00% 3. If interest rates jumped from 4% two 4.25%, by how much will Treasure bond future contracts change if the treasury bond has a duration of 9.5 years and contracts are quoted at 125-12? a. -$2,857 b. $2,857 C. -$2,863 d. $2,863 e. $3,128 4 Most banks have positive convexity (true or false) 5. Hartford bank needs to borrow $425 million by selling monthly time deposits with 180-day maturities. If comparable deposit rates are 2.25%, what is the cost of issuing these deposits? a. $9,562,500 b. $1,593,750 c. $885,417 d. $796,875 e. $318,750 6. Which of the following is not a method for measuring Asset-Liability Gap Analysis? a. The credit spread method b. The repricing models C. The maturity models d. The duration models e. All of the above 7. Access bank intends to purchase home mortgages with a target return of 6.5%. the bank is concerned that rates will drop, and the cost of the portfolio will rise from the current $50 million price. In 3-months rates are expected to be at 5% and treasury bonds options are quoted at $110,000 with a premium of $800 and the forecast to fall to $95,000. Should access bank buy puts or calls, and what is the pre-tax profit/loss per contract? a. Call, -$14,200 b. Put, $14,200 C. Call, $14,200 d. Put, $14,200 e. Cannot be determined
