Question

Consider the following: A) Calculate the leverage-adjusted duration gap of an Financial Institution that has assets...

Consider the following:
A) Calculate the leverage-adjusted duration gap of an Financial Institution that has assets of $1 million invested in 30-year, 10 % semiannual coupon Treasury bonds selling at par and whose duration has been estimated at 9.94 years. It has liabilities of $900,000 financed through a two-year, 7.25 % semiannual coupon note selling at par.

B)What is the impact on equity value if all interest rates fall 20 basis points?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the following. a. What is the duration of a four-year Treasury bond with a 11...
Consider the following. a. What is the duration of a four-year Treasury bond with a 11 percent semiannual coupon selling at par? b. What is the duration of a three-year Treasury bond with a 11 percent semiannual coupon selling at par? c. What is the duration of a two-year Treasury bond with a 11 percent semiannual coupon selling at par? Please show work using Duration Equation, not excel.
Consider the following. a. What is the duration of a four-year Treasury bond with a 8...
Consider the following. a. What is the duration of a four-year Treasury bond with a 8 percent semiannual coupon selling at par? b. What is the duration of a three-year Treasury bond with a 8 percent semiannual coupon selling at par? c. What is the duration of a two-year Treasury bond with a 8 percent semiannual coupon selling at par? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.16)) a Duration of...
Suppose a financial institution currently has a positive duration gap. How would its net worth be...
Suppose a financial institution currently has a positive duration gap. How would its net worth be expected to vary with changes in interest rates? Explain. Explain how a financial institution could “immunize” its net worth from changes in interest rates.
11- What is the duration gap for an investor with a year horizon who invests in...
11- What is the duration gap for an investor with a year horizon who invests in a bond with a duration of 10? 2 0 -2 None of answers 13- A fixedbond has a Macaulay Duration of 10. Which of the following could possibly be the band's Modified Duration? 12 None of answers 11 7 14- A income portfolio is invested equally among three zero coupon bonds with maturities of 3 years, years, and 10 years. What is the estimated...
26. The following balance sheet information is available (amounts in thousands of dollars and duration in...
26. The following balance sheet information is available (amounts in thousands of dollars and duration in years) for a financial institution: Amount Duration T-bills T-notes T-bonds Loans Deposits Federal funds Equity $ 90 55 176 2,724 2,092 238 715 0.50 0.90 x 7.00 1.00 0.01 Treasury bonds are five-year maturities paying 6 percent semiannually and sell- ing at par. a. What is the duration of the T-bond portfolio? b. What is the average duration of all the assets? c. What...
X Bank holds Assets and Liabilities whose average durations and dollar amounts are as shown in...
X Bank holds Assets and Liabilities whose average durations and dollar amounts are as shown in the following table: Asset and Liability Items Avg. duration in years Dollar amount in millions Investment Grade Bonds 10 $50 Non-deposit Borrowings 0.10   20 Consumer Loans 7   250 Commercial Loans 4   400 Deposits 1.10   600 Subordinated Notes 2.80   80 Treasury Bonds 8.25   120     Calculate the weighted-adjusted duration of X’s assets portfolio and liability portfolio. What is the leverage-adjusted duration gap? If the ALM...
Company T with total assets of $370 million and equity of $35 million has a leverage...
Company T with total assets of $370 million and equity of $35 million has a leverage adjusted duration gap of +0.20 years. One-year maturity notes are currently priced at par and are paying 4.5 percent annually. Two-year maturity notes are currently priced at par and are paying 6 percent annually. The terms of a swap of $100 million notional value of liabilities' payments are 4.95 percent annual fixed payments in exchange for floating rate payments tied to the annual discount...
Company T with total assets of $370 million and equity of $35 million has a leverage...
Company T with total assets of $370 million and equity of $35 million has a leverage adjusted duration gap of +0.20 years. One-year maturity notes are currently priced at par and are paying 4.5 percent annually. Two-year maturity notes are currently priced at par and are paying 6 percent annually. The terms of a swap of $100 million notional value of liabilities' payments are 4.95 percent annual fixed payments in exchange for floating rate payments tied to the annual discount...
Company T with total assets of $370 million and equity of $35 million has a leverage...
Company T with total assets of $370 million and equity of $35 million has a leverage adjusted duration gap of +0.20 years. One-year maturity notes are currently priced at par and are paying 4.5 percent annually. Two-year maturity notes are currently priced at par and are paying 6 percent annually. The terms of a swap of $100 million notional value of liabilities' payments are 4.95 percent annual fixed payments in exchange for floating rate payments tied to the annual discount...
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of...
A bond has a 25-year maturity, 10% coupon, 10% yields, $1000 face value, a duration of 10 years and a convexity if 135.5. Calculate the new value of the bond (in $), based on modified duration and convexity, if interest rates were to fall by 125 basis points.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT