Start Discovering Solved Questions and Your Course Assignments
TextBooks Included
Active Tutors
Asked Questions
Answered Questions
How do interest rate changes affect the value of bank assets and liabilities under the two methods? What is marking to market?
What minimum target ratio is typically used by regulators to measure a bank"s net worth relative to its assets?
Suppose DA = 3 years, DL = 6 years, k = .8, and A = $100million. What is the effect on owners' net worth if ?R/ (1 + R) rises 1 percent? (?E = $1,800,000).
How can manager use information on an FI"s duration gap to restructure, and thereby immunize, the balance sheet against interest rate risk?
How would the formula in equation have to be modified to take into account quarterly coupon payments and monthly coupon payments?
According to the liquidity premium hypothesis, what is the liquidity premium on the four-year Treasury security, L 4?
How does the liquidity premium theory of the term structure of interest rates differ from the unbiased expectations theory?
According to the unbiased expectations hypothesis, what does the market expect the one-year Treasury rate to be three years from today, E (3r1 ).
According to the unbiased expectations theory, what are the expected one-year rates for years 4, 5, and 6?
Nominal and Real Rates When we observe interest rates in the financial press, do we see nominal or real rates? Which are more relevant to investors?
Fed funds versus the Discount Rate Compare and contrast the Fed funds rate and the discount rate. Which market do you think is more active? Why?
Forward rates The current one-year interest rate is 6 percent and the current two-year interest. What is the implied forward rate for next year's one-year rate?
STRIPS yields A U.S. Treasury STRIPS maturing in 10 years has a current price of $502.57 for $1,000 of face value. What is the yield to maturity of this STRIPS?
Effective annual rates A credit card company states an annual percentage rate of 12 percent, which is actually a rate of 1 percent per month. What is the EAR?
T-bill yields A 30-day U.S. Treasury bill is selling at a 12 percent yield on a discount basis. Which is the approximate bond equivalent yield?
T-bill yields A U.S. Treasury bill with 180 days to maturity has a discount yield of 5 percent and a face value of $100,000. What is its current price?
Bond Equivalent Yields Suppose a T-bill has 75 days to maturity and an asked discount of 4 percent. What is the bond equivalent yield?
Money Market Prices The rate on a particular money market instrument, quoted on a discount basis, is 5 percent. What is instrument's price?
According to the unbiased expectations theory, what should be the current rate for a two-year Treasury security?
What is the maturity gap of this balance sheet? What is the expected net interest income in year 1 and year 2?
What is the maturity gap for County Bank? What will be the maturity gap if the interest rates on all assets and liabilities increase 1 percent?
What is the maturity gap of Scandia Bank? According to maturity Model what does this maturity gap imply about interest rate risk exposure faced by Scandia Bank?
What is the maturity gap for Gunnison? What is the weighted-average maturity of the liabilities for Gunnison?
How does the weighted-average maturity of the portfolio change? Explain the changes in the maturity values if the yields increase 1 percent.
Does Consumer Bank face interest rate risk? What happens to the value of the equity? How can a decrease in interest rates create interest rate risk?