5.Given the following balance sheet data on a Financial Institution, namely Canada Trust. ASSETSLIABILITIES/NET WORTH Liabilities$525 million
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Question:
5.Given the following balance sheet data on a Financial Institution, namely Canada Trust.
ASSETSLIABILITIES/NET WORTH
Liabilities$525 million
$650 millionNet worth$125 million
Given that the weighted average modified duration of asset portfolio is 3.75 years, while the weighted average modified duration of liability portfolio is 6.25 years.
a.Briefly discuss the sources of the Financial Institution's risk exposure.
b.Discuss the effects of a 10 basis points increase in interest rates on the following (Show your calculations).
- Asset portfolio of Canada Trust
- Liability portfolio of Canada Trust
- Net worth of Canada Trust
c.What advice would you give to the manager of Canada Trust?
Related Book For
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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