Question
Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are in parentheses; amounts are in millions.) Assets Liabilities and
Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are in parentheses; amounts are in millions.) Assets Liabilities and Equity Cash $ 20 Overnight repos $ 201 1-month T-bills (7.15%) 95 Subordinated debt 3-month T-bills (7.35%) 95 7-year fixed (8.65%) 160 2-year T-notes (7.60%) 60 8-year T-notes (9.06%) 110 5-year munis (floating rate) (8.30% reset every six months) 35 Equity 54 Total $ 415 Total $ 415 a. What is the repricing or funding gap if the planning period is 30 days? 91 days? 2 years? (Recall that cash is a non-interest-earning asset.) b. What is the impact over the next 30 days on net interest income if all interest rates rise by 30 basis points? c. The following one-year runoffs are expected: $20 million for two-year T-notes, $30 million for the eight-year T-notes. What is the one-year repricing gap? d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise by 30 basis points?
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