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QUESTION 7 Assume a bank has the following balance sheet. Determine the 2-year GAP. Asset Amount...

QUESTION 7
Assume a bank has the following balance sheet. Determine the 2-year GAP. Asset Amount Liability Amount Cash $100 90-day CDS $100 6-month $400 360-day CDs $200 Gbonds $400 Time Deposits $900 2-year 2-year commercial loans 5-year fixed rate loans Total $500 $200 Stockholder s equity Total $1,400 $1,400 GAP = (RSA, Yr – RSLZYP) 0 -$100 -$200 -$300 -$400

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Answer #1

GAP(2-year) = RSA(2) - RSL(2)

GAP(2-year) = risk sensitive Assets with maturity less than 2 years - risk sensitive liabilities with maturity less than 2 years

=> GAP(2-year)= 6-month Gbond + 2-year commercial loans - 90-day CDs - 360-day CDs - Time deposits

=> GAP(2-year) = 400 + 400 - 100 - 200 - 900 = -$400

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