Bank Portfolio Simulation Worksheet $-$ Round $1$

Version $2\mathrm{.}0$

Initial Bank Portfolio $-$ Round $1$

You are asked to allocate $\backslash (\backslash$$ $1,000,000\backslash )$ of initial equity capital among alternative liquid investments: cash, one year Treasury bills, $5-$year Treasury notes, and $15-$year Treasury bonds. Your goal is to maximize return and minimize risk in this start$-$up phase until you are able to generate riskier assets, such as loans, and leverage your initial equity with debt.

$1.$ Based on the possible outcomes you face, allocate your initial equity of $\backslash (\backslash$$ $1,000,000\backslash )$ among the asset possibilities provided in the initial balance sheet below $\backslash (\{\}^\{1\}\backslash )$ :

$\backslash$begin$\{$tabular$\}\{|$l$|$l$|$l$|$lr$|\}$

$\backslash$hline $\backslash$multicolumn$\{4\}\{|$c$|\}\{$ Balance Sheet t $\backslash (=1\backslash )$ : Start of Round $1\}\backslash \backslash$

$\backslash$hline $\backslash$multicolumn$\{2\}\{|$c$|\}\{$ Assets $\}$ & $\backslash$multicolumn$\{2\}\{$c$|\}\{$ Liabilities $\backslash$& Equity $\}\backslash \backslash$

$\backslash$hline Cash & Total Liabilities & $\backslash (\backslash$$ $\backslash )\backslash \backslash$

$\backslash$hline $1$ yr US Treasury Bill & & & $\backslash \backslash$

$\backslash$hline $5$yr US Treasury Note & & Common Stock & $\backslash (\backslash$$ $\backslash )$ & $\backslash (1,000,000\backslash )\backslash \backslash$

$\backslash$hline $15$yr US Treasury Bond & & Ret Earnings & $\backslash (\backslash$$ $\backslash )$ & $-\backslash \backslash$

$\backslash$hline & & Total Equity & $\backslash (\backslash$$ $\backslash )$ & $\backslash (1,000,000\backslash )\backslash \backslash$

$\backslash$hline & & & $\backslash \backslash$

$\backslash$hline Total Assets & & Total L$\backslash$&E & $\backslash (\backslash$$ $\backslash )$ & $\backslash (1,000,000\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$