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The clean Bank has the following assets and liabilities as of year-end.All asset and liability item have face value of $1,000 and are priced at par.And interests and coupons are paid annually for all asset and liability items.
| Assets | Amount($millions) | Annual Rate | Liabiltiies and Equity | Amount($millions) | Annual Rate |
| 5-year loans | 40 | 40% | 3-year term deposit | 20 | 4% |
| 5-year coupon bonds | 60 | 8% | 5-year term deposit | 30 | 8% |
| Equity | 50 | ||||
| Total | 100 | 100 |
Please calulate the Clean Bank's maturity gap.What does the maturity gap imply about the interest risk of the bank?Will you view on the interest risk of the bank be different under duration model?Explain carefully..
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- The University Club recently issued 1,500,000 of 10-year, 9% bonds at an effective interest rate of 10%. Bond interest is payable annually. You have been asked to calculate the issuance price of the bonds and prepare amortization schedules for any discount or premium. The worksheet BONDS has been provided to assist you. Note that the worksheet contains a scratch pad at the bottom that has been preprogrammed to automatically compute and display the relevant cash flows needed for bond pricing.Consider the following Balance Sheet for Forward Thinking Commercial Bank(FTCB) (in millions) ASSETS LIABILITIES Floating rate mortgages 250 Demand deposits 300 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 120 (currently 8% annually) Equity 20 370 370 a. What is FTCB expected net interest income (NII) at year end? b. What is FTCB expected net interest income at year end if interest rates fell by seven percent (7%). c. What is FTCB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.Consider the following Balance Sheet for Cutting Edge Commercial Bank(CECB) (in millions) ASSETS LIABILITIES Floating rate mortgages 120 Demand deposits 110 (currently 14% annually) (currently 5% annually) 30 years fixed rate loans 1 year CD 50 (currently 9% annually) 80 (currently 8% annually) Equity 40 200 200 1. What is CECB expected net interest income (NII) at year-end? 2. What is CECB expected net interest income at year end if interest rates fell by seven percent (7%). 3. What is CECB expected net interest income at year end if interest rates grew by 300 basis points on assets, but decline by 2% on liabilities.
- The following financial statement is for the current year. From the past information, you know that 8% of fixed-rate mortgages prepay each year. You also estimate that 9% of checkable deposits and 15% of savings accounts are rate sensitive. KLM Bank Assets Liabilities Reserves $ 750,000 Checkable Deposits $ 7,500,000 Securities Money Market Deposits $ 2,750,000 <1 Year $ 3,000,000 Savings Accounts $ 4,000,000 1 to 2 Years $ 4,000,000 CDs > 2 years $ 6,000,000 Variables-rate $ 7,500,000 Residential Mortgages < 1 Year $ 11,000,000 Variables-rate $ 3,500,000 1 to 2 Years $ 2,500,000 Fixed-rate $ 6,500,000 > 2 years $ 1,250,000 Commercial Loans Fed Funds $ 2,500,000 > 1 Year $ 750,000 Borrowings 1 to 2 Years $ 9,250,000 < 1 Year $ 6,000,000…Use the following information about IGI security dealer. Market yields are in parenthesis, and amounts are in millions. Assets Liabilities and Equity Cash $10 Overnight Repos $170 1 month T-bills (7.05%) 75 Subordinated debt 3 month T-bills (7.25%) 75 7-year fixed rate (8.55% 150 2 year T-notes (7.50%) 50 8 year T-notes (8.96%) 100 5 year munis (floating rate) (8.20% reset every 6 months) 25 Equity 15…Accounting for Current Liabilities A note payable is issued for a face value of $100,000. The interest is 8% and the note is for 12 months. What is the cash flow impact to the issuer at the maturity of the note payable?
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