Below is Dragon Bank's balance sheet (in billions): Duration Assets Reserves & Cash Variable Mortgages Commercial...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Below is Dragon Bank's balance sheet (in billions): Duration Assets Reserves & Cash Variable Mortgages Commercial Loans. Consumer Loans ?? 0 $10 2.0 $10 3.0 $7 0.7 Liabilities Checking Deposit Certificate Deposits (CDs) Equity $20 ??? $2 Duration 0.8 1.0 From past experience, you know that 10% of Consumer Loans and 50% of Checking Deposit are rate-sensitive. If the manager wants a Duration Gap of +1.03 years, what amount (in billions) of Certificate Deposits should the bank have? (3 marks) Below is Dragon Bank's balance sheet (in billions): Duration Assets Reserves & Cash Variable Mortgages Commercial Loans. Consumer Loans ?? 0 $10 2.0 $10 3.0 $7 0.7 Liabilities Checking Deposit Certificate Deposits (CDs) Equity $20 ??? $2 Duration 0.8 1.0 From past experience, you know that 10% of Consumer Loans and 50% of Checking Deposit are rate-sensitive. If the manager wants a Duration Gap of +1.03 years, what amount (in billions) of Certificate Deposits should the bank have? (3 marks)
Expert Answer:
Answer rating: 100% (QA)
The duration gap is a measure of how sensitive a banks assets and liabilities are to changes in inte... View the full answer
Related Book For
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
Posted Date:
Students also viewed these finance questions
-
The following financial statement is for the current year. From the past, you know that 10% of fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of...
-
The manager for Tyler Bank and Trust has the following assets and liabilities to manage: If the manager wants a duration gap of 3.00, what level of saving accounts should the bank raise? Assume that...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Describe at least one method by which the organization can reduce change resistance?
-
Consider following data for a defender asset. What is the appropriate replacement analysis technique to -compare this asset against a competing challenger? How is this method used? That is, what...
-
During 2012, Nilsen Company started a construction job with a contract price of $1,600,000. The job was completed in 2014. The following information is available. Instructions(a) Compute the amount...
-
Mailmax Direct is incorporated in the state of Arizona. The charter authorizes Mailmax to issue 1,000 shares of \(6 \%, \$ 100\) par preferred stock and 250,000 shares of \$10-par common stock. In...
-
Klamath Company produces a single product. The projected income statement for the coming year is as follows: Sales (54,600 units @ $34) ........$1,856,400 Total variable cost...
-
You are the Special Assistant to the President of the United States. He has asked you to write a briefing' paper on a topic related to American Government. The topic can be taken from a newspaper...
-
Prepare the journal entries of the following transactions. 1. On January 1, 20XX, BVD Corp. issued 3,500 shares of $50 par, 7% preferred stock for $275,000. 2. On January 1, 20XX, BVD Corp. also...
-
Develop a 2019 individual tax return (with all required forms and supporting schedules) for Don and Megan Draper that is both professional in appearance and technically correct. The use of an E-file...
-
A long, straight wire carrying \(1.5 \mathrm{~A}\) of current to the left is placed above a large, flat sheet through which the current per unit width is \(3.0 \mathrm{~A} / \mathrm{m}\) to the left....
-
Electron 1 , initially traveling to the right at \(1.5 \times 10^{6} \mathrm{~m} / \mathrm{s}\), is accelerated upward at \(900 \mathrm{~m} / \mathrm{s}^{2}\) by the electromagnetic force exerted by...
-
At a location \(25 \mathrm{~mm}\) away from a long, straight currentcarrying wire, the magnitude of the magnetic field due to the wire is \(2.0 \times 10^{-5} \mathrm{~T}\). Calculate the magnitude...
-
A toroid carries a current \(I\) and has \(n\) circular windings per unit length measured along the inside edge of the windings. The radius of each circular winding is \(R_{\text {winding }}\), and...
-
At what radial distance \(r\) from the center of a toroid of 200 windings does the magnitude of the magnetic field equal that found inside a solenoid that has 500 turns per meter of length? Assume...
-
How has Kuwaiti Dinar (KWD appreciated versus the U.S. dollar in recent weeks, months, or last two years: Support the reason for appreciation with at least two fundamental factors such as...
-
A number of years ago the United Food and Commercial Workers Union organized 800 workers of the 1035 employees at one of the Wilson Brothers food operations in Toronto, Ontario. The employees include...
-
What are the benefits and costs to an FI of holding large amounts of liquid assets? Why are Treasury securities considered good examples of liquid assets?
-
Calculate the term structure of default probabilities over three years using the following spot rates from the Treasury strip and corporate bond (pure discount) yield curves. Be sure to calculate...
-
A mutual fund owns 300 shares of General Electric, currently trading at $22, and 400 shares of Microsoft, Inc., currently trading at $28. The fund has 1,000 shares outstanding. a. What is the net...
-
Using Rayeigh's method, determine the fundamental natural frequency of the system shown in Fig. 8.42. Disc, mass moment of inertia 5 kg-m Steel shaft, dia. 5 cm + O 0.8 m -0.2 m- FIGURE 8.42...
-
Solve Problem 8.73 using the Rayleigh-Ritz method with the mode shape \[U(x)=c_{1} \sin \frac{\pi x}{2 l}+c_{2} \sin \frac{3 \pi x}{2 l}\]
-
Using Program \(12 . \mathrm{m}\), solve Example 8.4. Data From Example 8.4:- Find the natural frequencies of a bar with one end fixed and a mass attached at the other end, as in Fig. 8.9.
Study smarter with the SolutionInn App