16. Use the following information about a hypothetical government security dealer named M. P. Jorgan. Market...

 

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16. Use the following information about a hypothetical government security dealer named M. P. Jorgan. Market yields are in parentheses and amounts are in millions. Assets Cash 1-month T-bills (7.05%) 3-month T-bills (7.25%) 2-year business loans (7.50%) 8-year mortgage loans (8.96%) 5-year munis (floating rate) (8.20% reset every 6 months) Total assets $ 10 75 75 50 100 25 $335 Liabilities and Equity Overnight repos Subordinated debt 7-year fixed rate (8.55%) Equity Total liabilities and equity $170 150 15 $335 a. What is the repricing gap if the planning period is 30 days? 3 months? 2 years? Recall that cash is a noninterest-earning asset. b. What is the impact over the next 30 days on net interest income if interest rates increase 50 basis points? Decrease 75 basis points? c. The following one-year runoffs are expected: $10 million for two-year busi- ness loans and $20 million for eight-year mortgage loans. What is the one- year repricing gap? d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates increase 50 basis points? Decrease 75 basis points? 16. Use the following information about a hypothetical government security dealer named M. P. Jorgan. Market yields are in parentheses and amounts are in millions. Assets Cash 1-month T-bills (7.05%) 3-month T-bills (7.25%) 2-year business loans (7.50%) 8-year mortgage loans (8.96%) 5-year munis (floating rate) (8.20% reset every 6 months) Total assets $ 10 75 75 50 100 25 $335 Liabilities and Equity Overnight repos Subordinated debt 7-year fixed rate (8.55%) Equity Total liabilities and equity $170 150 15 $335 a. What is the repricing gap if the planning period is 30 days? 3 months? 2 years? Recall that cash is a noninterest-earning asset. b. What is the impact over the next 30 days on net interest income if interest rates increase 50 basis points? Decrease 75 basis points? c. The following one-year runoffs are expected: $10 million for two-year busi- ness loans and $20 million for eight-year mortgage loans. What is the one- year repricing gap? d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates increase 50 basis points? Decrease 75 basis points?

Answer rating: 100% (QA)

a Repricing gap for planning periods 30 days 85 million cash overnight r... View the full answer