Use the following information about a hypothetical government security dealer named J.P. Groman. (Market yields are in
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 Equity | ||||
Cash | $ | 24 | Overnight repos | $ | 225 |
1-month T-bills (7.19%) | 103 | Subordinated debt | |||
3-month T-bills (7.39%) | 103 | 7-year fixed (8.69%) | 164 | ||
2-year T-notes (7.64%) | 64 | ||||
8-year T-notes (9.10%) | 114 | ||||
5-year munis (floating rate) (8.34% reset every six month) | 39 | Equity | 58 | ||
Total | $ | 447 | Total | $ | 447 |
a. What is the repricing or funding gap if the planning period is 30 days? 91 days? 2 years? (Recall that cash is a noninterest-earning asset.) (Enter your answers in millions. Negative amounts should be indicated by a minus sign.)
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b. What is the impact over the next 30 days on net interest income if all interest rates rise by 70 basis points? (Input the amount as a positive value.)
c. The following one-year runoffs are expected: $18 million for two-year T-notes, $28 million for the eight-year T-notes. What is the one-year repricing gap? (Enter your answer in millions.)
d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise by 70 basis points? (Input the amount as a positive value.)
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders , Marcia Cornett