Your employer has asked you to examine the interest-rate risk of your bank relative to your direct competition. Management is concerned that interest rates will fall by the end of the year and wants to see what would happen to the relative profitability of the firm if the decline actually occurs.

The interest-rate risk depends on each bank's relative position of interest-sensitive assets and liabilities. You begin the analysis by collecting the information and estimates.

   

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Bank Balance Sheet Assets Reserves and cash items Securities Less than 1 year 1-2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30 years) Commerical loans Less than 1 year 1-2 years Greater than 2 years Physical capital Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1-2 years Greater than 2 years Less than 1 year 1-2 years Greater than 2 years Fed funds Borrowings Amount (Smillions) 3 9 15 13 31 55 10 437 OF 5 10 5 12 69850 19 Your Firm 15 10 12 9 39 Duration (years) 0.0 0.6 660 1.6 5.0 0.4 ๘ เดื +50 5.5 0.9 1.8 6.0 0.0 OFEO 1.0 888 0.6 1.0 0.4 0.3 1.1 2.9 0.0 0.4 N-O 629 1.2 2.9 Amount (Smillions) 4 579 21 17 30 22 30 25 14 9 16 210040 18 12 31 Competition Duration (years) 0.0 0.3 1.2 4.0 OT 94 0.9 4.4 0.6 1.4 5.4 0.0 6440 1.0 0.5 1.0 0.6 0.5 OO-NO 65820 1.8 2.2 0.0 013 0.7 1.8 3.8 788 Bank Balance Sheet Assets Reserves and cash items Securities Less than 1 year 1-2 years Greater than 2 years Residential mortgages Variable-rate Fixed-rate (30 years) Commerical loans Less than 1 year 1-2 years Greater than 2 years Physical capital Liabilities Checkable deposits Money market deposit accounts Savings deposits CDs Variable-rate Less than 1 year 1-2 years Greater than 2 years Less than 1 year 1-2 years Greater than 2 years Fed funds Borrowings Amount (Smillions) 3 9 15 13 31 55 10 437 OF 5 10 5 12 69850 19 Your Firm 15 10 12 9 39 Duration (years) 0.0 0.6 660 1.6 5.0 0.4 ๘ เดื +50 5.5 0.9 1.8 6.0 0.0 OFEO 1.0 888 0.6 1.0 0.4 0.3 1.1 2.9 0.0 0.4 N-O 629 1.2 2.9 Amount (Smillions) 4 579 21 17 30 22 30 25 14 9 16 210040 18 12 31 Competition Duration (years) 0.0 0.3 1.2 4.0 OT 94 0.9 4.4 0.6 1.4 5.4 0.0 6440 1.0 0.5 1.0 0.6 0.5 OO-NO 65820 1.8 2.2 0.0 013 0.7 1.8 3.8 788

Answer rating: 100% (QA)

Answer 1 a and b Your Firm Competitors Amountmillions Duration yrs Amountmillions Duration yrs Assets Securities Less than 1 year 4 06 5 03 12 yrs 3 1... View the full answer