2. TD Bank has the following assets and liabilities as of year-end. All assets and liabilities...

 

Transcribed Image Text:

2. TD Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. Assets Amount Annual Liabilities Amount Annual ($ millions) Rate ($ millions) Rate 2-year loans $ 40 8% 3-year GIC $ 60 7% 3-year loans $ 60 8% 5-year term deposit $ 30 6% Total $100 Equity Total $ 10 $100 a. What is the change in the value of its assets if all interest rates decrease by 1 percent? b. What is the change in the value of its liabilities if all interest rates decrease by 1 percent? c. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent? 2. TD Bank has the following assets and liabilities as of year-end. All assets and liabilities are currently priced at par and pay interest annually. Assets Amount Annual Liabilities Amount Annual ($ millions) Rate ($ millions) Rate 2-year loans $ 40 8% 3-year GIC $ 60 7% 3-year loans $ 60 8% 5-year term deposit $ 30 6% Total $100 Equity Total $ 10 $100 a. What is the change in the value of its assets if all interest rates decrease by 1 percent? b. What is the change in the value of its liabilities if all interest rates decrease by 1 percent? c. What is the effect on the value of the FI's equity if interest rates decrease by 1 percent?