Mini Case: National One Bank is a leading financial institution. It has the following market value balance sheet (in millions, all interest at annual rates). All securities are selling at par equal to book value. The Risk Manager wants to know what would be the impact of any expected changes in interest rate on the net worth of this bank?, so he gave this balance sheet to one of his staff to provide him with answers on the following questions:

Assets

Cash $20

15 -year commercial loan at

interest 160

30 -year mortgages at

Interest 300

Total Assets $480

Liabilities and Equity

Demand deposits
5-year CDs at interest	210
20-year debentures at
interest	120
Equity	50
Total Liabilities and Equity

 

 What is the maturity gap for County Bank? 

 What will be the maturity gap if the interest rates on all assets and liabilities increase 1 percent?

  What will happen to the market value of the equity?

 

Answer rating: 100% (QA)

To answer the Risk Managers questions we need to calculate the present value of the banks assets and ... View the full answer