Response to the following 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 and Equity
|
|
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
|
Total
|
$335
|
a. 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.)
b. What is the impact over the next 30 days on net interest income if all interest rates rise by 50 basis points?
c. The following one-year runoffs are expected: $10 million for two-year T-notes, $20 million for the eight-year T-notes. What is the one-year repricing gap?
d. If runoffs are considered, what is the effect on net interest income at year-end if interest rates rise by 50 basis points?