Problem: Use the following information about a hypothetical government security dealer named J.P.Groman.
(Market yields are in parentheses; amounts are in millions.)
Assets Liabilities
Cash $10 Overnight repos $170
1-month T-bills (7.05%) $75 Subordinated debt
3-month T-bills (7.25%) $75 7-year fixed (8.55%) $150
2-year T-notes (7.50%) $50
8-year T-notes (8.96%) $100
5-year munis (floating rate) (8.20% reset every six months) $25 Equity $15
Total $335 $335
Q1. What is the repricing or funding gap if the planning period is 30 days? 91 days? 2 years? (Recall that cash is a noninterest-earning asset.)
Q2. What is the impact over the next 30 days on net interest income if all interest rates rise by 50 basis points?
Q3. The following one-year runoffs are expected: $10M for two-year T-notes, $20M for the eight-year notes. What is the one-year repricing gap?
Q4. If runoffs are considered, what is the effect on net interest income at year end if interest rates rise by 50 basis points?