The book value of DRAGON SLAYER BANKs balance sheet is listed below. The current market yield for
Question:
The book value of DRAGON SLAYER BANK’s balance sheet is listed below. The current market yield for the securities is in parentheses. The amounts are in millions.
Asset | Liability & Equity | ||
Cash | 55 | Demand deposits | 300 |
6 month T-bills (4.25%) | 50 | Savings accounts (2.0%) | 205 |
2 year personal fixed rate loan at | 100 | 3 month CD (2.50%) | 150 |
6.50% | |||
3 year T bills (4.85%) | 100 | 9 months CDs (3.85%) | 150 |
3 year 5.5% semi-annual coupon | 90 | 1 year term deposit (4.0%) | 520 |
T-notes (5.25%) | |||
5 year 6.2% semi-annual coupon | 100 | 2 year term deposits (4.30%) | 200 |
T-notes (5.75%) | |||
5 year personal loan (11.5%, | 350 | ||
repriced yearly) | |||
5 year bond 8.0% annual coupon | 150 | 5-year bonds at 6.75% | 250 |
issued by Spanish government with | semiannual interest, balloon | ||
rating credit rating B | payment | ||
20-year bonds at 7.5% | 250 | ||
interest, balloon payment | |||
10 year commercial loan (12.25% | 730 | ||
repriced @ 6 months) | Subordinate notes: | ||
15-year commercial loan at 10% | 220 | 3-year fixed rate (5.65%) | 230 |
interest (repriced monthly) | |||
20-year sovereign bonds 12.0% | 150 | 6-year fixed rate (6.00%) | 150 |
annual-coupon issued by | |||
Cambodian government with BB | |||
rating | Ordinary Equity | 20 | |
20-year mortgages at 8.5% interest | 390 | Preference shares | 20 |
(LVR 65%, no mortgage | |||
insurance), balloon payment^ | Retained Earnings | 40 | |
Total Assets | Total liability and equity | ||
2485 | 2485 |
Required
What is the cumulative re-pricing gap if the planning period is 3 month 2 year.
What will happen to the net interest income of the bank, if interest on the banks rate sensitive assets is forecasted to decrease by 60 basis points and rate-sensitive liabilities to increase 25 basis points in 6 months’ time
3).Due to the uncertainty in the economy, based on the bank’s estimate there is a potential of decrease in the demand deposits. What are some of the impact may that have on the bank’s overall asset-liability?
4).Does the bank have sufficient liquid capital to cushion any unexpected losses as per the Basle III requirement? (ignore cyclical buffer requirement)
Expert Answer:
1 Gap Value of Rate sensitive Assets Value of Rate sensitive Liabilities 1 6 months Gap 50 1225 1175 Million 2 2 years gap 1000 1225 22500 Million Rat... View the full answer
