Question: Use DGAP analysis to determine if there is interest rate

Use DGAP analysis to determine if there is interest rate risk in the following transaction: A bank obtains $ 25,000 in funds from a customer who makes a deposit with a five- year maturity that pays 5 percent annual interest compounded daily. All interest and principal are paid at the end of five years. Simultaneously, the bank makes a $ 25,000 loan to an individual to buy a car. The loan is at a fixed rate of 12 percent annual interest but is fully amortized with 60 monthly payments, such that the borrower pays the same dollar amount (principal plus interest) each month.

View Solution:


Sale on SolutionInn
Sales0
Views48
Comments
  • CreatedNovember 03, 2015
  • Files Included
Post your question
5000