Consider the balance sheet of Bush Bank. The bank just opened for business, and all dollar amounts
Question:
Consider the balance sheet of Bush Bank. The bank just opened for business, and all dollar amounts are market values. Bush Bank owns three assets: cash ($100 million), a three-year final maturity commercial loan ($700 million) earning 12 percent, and a six-year Treasury bond ($200) earning 8 percent. It pays interest on one-year time deposits (TDs ($620 million)) at 5 percent and three-year CDs at 7 percent. The economic value of equity is 8 percent of assets. The analysis assumes that there will be no defaults, prepayments, or early deposit withdrawals. All securities make equal annual interest payments with annual compounding.
PLEASE ANSWER THE QUESTIONS
Calculate the weighted average duration of assets
Calculate the weighted average duration of liabilities
Calculate Expected Net interest income
Calculate Leverage Adjusted Duration GAP
Accounting Principles Part 1
ISBN: 978-1118306789
6th Canadian edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow