Use the data provided for Gotbucks Bank, Inc., to answer thisquestion.
Gotbucks Bank, Inc. (in $ millions) Assets Liabilities and Equity Cash $ 45 Core deposits $ 28 Federal funds 35 Federal funds 65 Loans(floating) 120 Euro CDs 145 Loans (fixed) 80 Equity 42 Total assets $ 280 Total liabilitiesand equity $ 280
Notes to the balance sheet: Currently, the fed funds rate is 10percent. Variable-rate loans are priced at 3 percent over LIBOR(currently at 11 percent). Fixed-rate loans are selling at par andhave five-year maturities with 12 percent interest paid annually.Assume that fixed rate loans are non-amortizing. Core deposits areall fixed rate for two years at 8 percent paid annually. Euro CDscurrently yield 9 percent.
a. What is the duration of Gotbucks Bankâs (GBI) fixed-rate loanportfolio if the loans are priced at par? (Do not roundintermediate calculations. Round your answer to 3 decimal places.(e.g., 32.161))
Duration years
b. If the average duration of GBIâs floating-rate loans (includingfed fund assets) is .51 year, what is the duration of the bankâsassets? (Note that the duration of cash is zero.) (Do notround intermediate calculations. Round your answer to 3 decimalplaces. (e.g., 32.161))
Duration(assets) years
c. What is the duration of GBIâs core deposits if they are pricedat par? (Do not round intermediate calculations. Round youranswer to 3 decimal places. (e.g., 32.161))
Duration(deposits) years
d. If the duration of GBIâs Euro CDs and fed fund liabilities is.416 years, what is the duration of the bankâs liabilities?(Do not round intermediate calculations. Round your answerto 4 decimal places. (e.g., 32.1616))
Duration(liabilities) years
e-1. What is GBIâs duration gap? (Do not round intermediatecalculations. Round your answer to 4 decimal places. (e.g.,32.1616))
Duration gap years
e-2. What is the expected change in equity value if all yieldsincrease by 300 basis points? (Enter your answer in dollarsnot in millions. Negative amount should be indicated by a minussign. Do not round intermediate calculations.)
Expected change inequity value $
e-3. Given the equity change in e-2. what is the expected new marketvalue of equity after the interest rate change? (Enter youranswer in dollars not in millions. Negative amount should beindicated by a minus sign. Do not round intermediatecalculations.)
New marketvalue $
Use the data provided for Gotbucks Bank, Inc., to answer thisquestion. |
| Gotbucks Bank, Inc. (in $ millions) | |||||
| Assets | Liabilities and Equity | ||||
| Cash | $ | 45 | Core deposits | $ | 28 |
| Federal funds | 35 | Federal funds | 65 | ||
| Loans(floating) | 120 | Euro CDs | 145 | ||
| Loans (fixed) | 80 | Equity | 42 | ||
| Total assets | $ | 280 | Total liabilitiesand equity | $ | 280 |
Notes to the balance sheet: Currently, the fed funds rate is 10percent. Variable-rate loans are priced at 3 percent over LIBOR(currently at 11 percent). Fixed-rate loans are selling at par andhave five-year maturities with 12 percent interest paid annually.Assume that fixed rate loans are non-amortizing. Core deposits areall fixed rate for two years at 8 percent paid annually. Euro CDscurrently yield 9 percent. |
| a. | What is the duration of Gotbucks Bankâs (GBI) fixed-rate loanportfolio if the loans are priced at par? (Do not roundintermediate calculations. Round your answer to 3 decimal places.(e.g., 32.161)) |
| Duration | years |
| b. | If the average duration of GBIâs floating-rate loans (includingfed fund assets) is .51 year, what is the duration of the bankâsassets? (Note that the duration of cash is zero.) (Do notround intermediate calculations. Round your answer to 3 decimalplaces. (e.g., 32.161)) |
| Duration(assets) | years |
| c. | What is the duration of GBIâs core deposits if they are pricedat par? (Do not round intermediate calculations. Round youranswer to 3 decimal places. (e.g., 32.161)) |
| Duration(deposits) | years |
| d. | If the duration of GBIâs Euro CDs and fed fund liabilities is.416 years, what is the duration of the bankâs liabilities?(Do not round intermediate calculations. Round your answerto 4 decimal places. (e.g., 32.1616)) |
| Duration(liabilities) | years |
| e-1. | What is GBIâs duration gap? (Do not round intermediatecalculations. Round your answer to 4 decimal places. (e.g.,32.1616)) |
| Duration gap | years |
| e-2. | What is the expected change in equity value if all yieldsincrease by 300 basis points? (Enter your answer in dollarsnot in millions. Negative amount should be indicated by a minussign. Do not round intermediate calculations.) |
| Expected change inequity value | $ |
| e-3. | Given the equity change in e-2. what is the expected new marketvalue of equity after the interest rate change? (Enter youranswer in dollars not in millions. Negative amount should beindicated by a minus sign. Do not round intermediatecalculations.) |
| New marketvalue | $ |
