Bank Omega has the following balance sheet (in millions): Assets Amount Rate earned Liabilities and Equity...

 

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Bank Omega has the following balance sheet (in millions): Assets Amount Rate earned Liabilities and Equity Amount Rate paid ($million) per annum ($million) per annum 3-month Treasury notes 250 5.5% 6-month certificates of deposit 450 5% 2-year short-term loans (variable 550 7% 9-month term 250 6% rate adjusted monthly) deposits (fixed rate) 8-year long-term loans (fixed rate) 150 8.5% 30-year subordinated 100 7% debt (fixed rate) Premises (non-earning) 50 Equity 200 Total 1000 Total 1000 (i) Calculate Bank Omega's one-year repricing gap (show all workings). (3 marks) (ii) Assume interest rates are anticipated to increase by 50 basis points for Rate- Sensitive Assets, and increase by 25 basis points for Rate-Sensitive Liabilities in the next 12 months. Calculate the expected change in the bank's Net Interest Income (show all workings). (4 marks) Bank Omega has the following balance sheet (in millions): Assets Amount Rate earned Liabilities and Equity Amount Rate paid ($million) per annum ($million) per annum 3-month Treasury notes 250 5.5% 6-month certificates of deposit 450 5% 2-year short-term loans (variable 550 7% 9-month term 250 6% rate adjusted monthly) deposits (fixed rate) 8-year long-term loans (fixed rate) 150 8.5% 30-year subordinated 100 7% debt (fixed rate) Premises (non-earning) 50 Equity 200 Total 1000 Total 1000 (i) Calculate Bank Omega's one-year repricing gap (show all workings). (3 marks) (ii) Assume interest rates are anticipated to increase by 50 basis points for Rate- Sensitive Assets, and increase by 25 basis points for Rate-Sensitive Liabilities in the next 12 months. Calculate the expected change in the bank's Net Interest Income (show all workings). (4 marks)

Answer rating: 100% (QA)

i To calculate Bank Omegas oneyear repricing gap we need to determine the repricing intervals for bo... View the full answer