State Bank's balance sheet is listed below. Market yields and durations (in years) are in parenthesis, and

Question:

State Bank's is listed below. Market yields and durations (in years) are in parenthesis, and amounts are in millions.

State Bank€™s balance sheet is listed below. Market yields and

a. What is the repricing gap if the planning period is six months? One year?
b. What is State Bank€™s duration gap?
c. What is the impact over the next six months on net interest income if interest rates on RSAs increase 50 basis points and on RSLs increase 35 basis points? Explain the results.
d. What is the impact over the next year on net interest income if interest rates on RSAs decrease (increase) 35 basis points and on RSLs decrease (increase) 50 basis points? Explain the results.
e. Use these duration values to calculate the expected change in the value of the assets and liabilities of State Bank for a predicted decrease of 0.35 percent in interest rates on assets and 0.50 percent on liabilities.
f. What is the change in equity value forecasted from the duration values for decrease of 0.35 percent in interest rates on assets and 0.50 percent on liabilities?
g. Use the duration gap model to calculate the change in equity value if the relative change in all market interest rates is a decrease of 50 basis points.

Balance Sheet
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...