A bank only asset is a peculiar 3-year, 6% $100 million bond where payments are paid at the end of year 2 and 3. The Term structure is flat with all yields equal to 6%. The banks liability includes 1 year debt that promises to pay out $84.8 after a year, implying that the debt value today is 84.8/1.06 = $80. 

What will be the banks equity capital?

Answer rating: 100% (QA)

To determine the banks equity capital we need to calculate the present value of th... View the full answer