Question: The following financial statement is for the current year: Second Link Bank Assets (RM) Duration Liabilities (RM) Duration Reserves 5,000,000 Securities < 1 year 5,000,000
- The following financial statement is for the current year:
|
| Second Link Bank |
| |||
| Assets (RM) | Duration | Liabilities (RM) | Duration | ||
| Reserves 5,000,000 Securities < 1 year 5,000,000 | 0.00
0.40 | Checkable 15,000,000 deposits 5,000,000
| 2.00 0.10
| ||
| 1 to 2 years >2 years Residential mortgages Variable rate Fixed rate Commercial loans <1 year 1 to 2 years >2years Buildings, etc.
Total | 5,000,000 10,000,000
10,000,000 10,000,000
15,000,000 10,000,000 25,000,000 5,000,000
100,000,000 | 1.60 7.00
0.50 6.00
0.70 1.40 4.00 0.00 | Money market deposits Savings accounts CDs Variable-rate <1 year 1 to 2 years >2 years Interbank loans Borrowings <1 year 1 to 2 years >2 years Bank Capital Total | 15,000,000
10,000,000 15,000,000 5,000,000 5,000,000 5,000,000
10,000,000 5,000,000 5,000,000 5,000,000
100,000,000 | 1.00
0.50 0.20 1.20 2.70 0.00
0.30 1.30 3.10 |
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- Calculate the duration gap for the bank. [5 marks]
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- Calculate the expected net worth if interest rates were to raise 100 basis points from the current rate of 10%. [4 marks]
- What action could the managements take to decrease it interest rate risk? [6 marks]
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