Bank ABC has the following 2 bond-like loans: Loan 1: $1m loan fixed for 3 years at

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Bank ABC has the following 2 bond-like loans:

Loan 1: $1m loan fixed for 3 years at 10%

Loan 2: $1m loan fixed for 5 years at 12%

I. a) The market interest rate is now at 5%. The duration of the bank’s loan portfolio is _____ years.

b) If the market interest rate increases by 1% now, the percentage change of the present value of the portfolio would be ____ percent.

2. ABC has $1.5m of liabilities (at market value) with a duration of 2.68 years. The value of the bank change due to the change in interest rate would be $____ thousand.

Related Book For answer-question

Income Tax Fundamentals 2013

ISBN: 9781285586618

31st Edition

Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill

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Posted Date: Sep 10, 2023 08:52 AM

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Bank ABC has the following 2 bond-like loans: Loan 1: $1m loan fixed for 3 years at

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Income Tax Fundamentals 2013

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