Dgap analysis to determine interest rate risk

Assignment Help Financial Management
Reference no: EM13884940

Use DGAP analysis to determine if there is interest rate risk in the following transaction:

A bank obtains $ 25,000 in funds from a customer who makes a deposit with a five- year maturity that pays 5 percent annual interest compounded daily. All interest and principal are paid at the end of five years. Simultaneously, the bank makes a $ 25,000 loan to an individual to buy a car. The loan is at a fixed rate of 12 percent annual interest but is fully amortized with 60 monthly payments, such that the borrower pays the same dollar amount (principal plus interest) each month.

Reference no: EM13884940

Questions Cloud

Descriptions of three different employees are presented : Descriptions of three different employees are presented. After reading several times, identify employee and describe the potential causes of poor performance in each case separately.
What are the different types of screening or diagnostic test : What are the different types of screening or diagnostic tests available to study salmonella?
Calculate the bonds effective duration : Calculate the bond's price if the market rate increases by 50 basis points (0.25 percent semiannually) using the present value formula from Chapter 6. Calculate the bond's effective duration assuming a 50 basis point increase or decrease in market ra..
Calculate maximum shear stress and angle of twist in degrees : If the modulus of rigidity of the shaft material G is 90 GPa, calculate the maximum shear stress and the angle of twist in degrees
Dgap analysis to determine interest rate risk : Use DGAP analysis to determine if there is interest rate risk in the following transaction: A bank obtains $ 25,000 in funds from a customer who makes a deposit with a five- year maturity that pays 5 percent annual interest compounded daily. All inte..
What clinical manifestations are present in ms. g : What clinical manifestations are present in Ms. G and what recommendations would you make for continued treatment?
Calculate least radius of gyration and the slenderness ratio : Calculate the least radius of gyration and the slenderness ratio and the maximum axial load that the column can carry
Relationship to ana scope and standards of practice : Relationship to ANA Scope and Standards of Practice
Optimal replacement strategy for a machine : A machine for shaping corkscrews tends to break down more often as it ages, producing less cork screws for sale, and costing more to maintain. What is the optimal replacement strategy for the machine given the following data

Reviews

Write a Review

Financial Management Questions & Answers

  What is the value of this annuity today if the discount rate

Tara Knowles buys an annuity that will pay her $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 8.5 percent?

  Investing in an emerging market bond is risky

From an US investor's perspective, investing in an emerging market bond is risky because of:

  How much cash flow before tax and interest is necessary

How much cash flow before tax and interest is necessary to support a project that requires $4 million annually for equity investors and $2 million annually in interest payments if the firm's tax rate is 35%?

  Determine the simple interest rate for loan

Second Law Venture Capital loaned Thane Magnomotor Corp $26,750,000 for 11 months. The maturity value of the note was $30,000,000.  Determine the simple interest rate for this loan.

  Based on your reading of the book what money cant buy the

based on your reading of the book what money cant buy the moral limits of the markets by michael j. sandel write an

  Self-employed person deposits

A self-employed person deposits $1,250 annually in a retirement account that earns 5.5%. What will be the account balance at age 62 if the savings program starts when the individual is age 50?

  Why are revisions of monetary aggregates less of problem

Why are revisions of monetary aggregates less of a problem for measuring long-run movements of the money supply than they are for measuring short-run movements?

  Face value bond is currently quoted

A $1,000 face value bond is currently quoted at 101.2. The bond pays semiannual payments of $28.50 each and matures in six years. What is the coupon rate?

  What is the profitability index for each project

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 341,000 –$ 51,000 1 54,000 24,900 2 74,000 22,900 3 74,000 20,400 4 449,000 15,500 which ever project you choose, if any, you require a 15 percent return on..

  Risk-adjusted assets-transactions affect the value

Onshore Bank has $29 million in assets, with risk-adjusted assets of $19 million. CET1 capital is $900,000, additional Tier I capital is $250,000, and Tier II capital is $418,000. How will each of the following transactions affect the value of the CE..

  What is your total gain or loss

You sell short 100 shares of Merck at $30 per share. One week following your short sale, Merck announces it has found the cure for cancer and its stock price increases to $750 per share. Assume you placed a stop buy order at $100 when you sold short...

  Whats one way she might be able to obtain bank credit card

A year after declaring bankruptcy and moving with her daughter back into her parents' home, Nancy Silbermann is about to get a degree in nursing. As she starts out in a new career, she also wants to begin a new life. In addition to opening checking a..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd