The following balance sheet information is available (amounts in thousands of dollars and duration in years) for
Question:
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Treasury bonds are five-year maturities paying 6 percent semiannually and selling at par.
a. What is the duration of the T-bond portfolio?
b. What is the average duration of all the assets?
c. What is the average duration of all the liabilities?
d. What is the leverage adjusted duration gap? What is the interest rate risk exposure?
e. What is the forecasted impact on the market value of equity caused by a relative upward shift in the entire yield curve of 0.5 percent [i.e., ï„R/(1+R) = 0.0050]?
f. If the yield curve shifts downward by 0.25 percent [i.e., ï„R/(1+R) = -0.0025], what is the forecasted impact on the market value of equity?
g. What variables are available to the financial institution to immunize the balance sheet? How much would each variable need to change to get DGAP equal to 0?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a b 0590 0955 43931176 727243045 65470 years c 12092 0012382330 08989 years d DGAP DA kDL 65470 2330...View the full answer
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
