Reference no: EM131934250 , Length: word count:1500

BANK MANAGEMENT ASSIGNMENT

You must answer all your questions in one document (i.e. Word) and you can provide screenshots or copy and paste your working from Excel into the document to support your answer. Your answers need to be clear and concise. The total word limit for the report is 1,500 words.

Assignment - Consider the four banks balance sheet in Appendix A and associated average interest rates. The period for rate sensitivity is one year. Figures are in thousands.

PART 1 - For each four banks in Appendix A (attached), calculate their GAP, expected NII, and NIM if interest rates and portfolio composition remain constant during the year. Explain how each bank is positioned to profit if interest rates move in which direction.

PART 2 - Calculate the change in expected NII and NIM if interest rates shift 2 percent higher during the year. Is this outcome consistent with each bank's static GAP?

PART 3 - Suppose that, instead of the parallel shift in interest rates in PART 2, interest rates increase unevenly. Specifically, suppose that asset yields rise by 0.50 percent while liability rates rise by 0.75 percent. Calculate the change in NII and NIM. Is this uneven shift in rates more of less likely than a parallel shift?

PART 4 - Suppose each bank converts £150 of RSLs to fixed-rate liabilities during the year and interest rates remain constant. What would the bank's NII equal compared with the amount initially expected? Explain why there is a difference.

PART 5 - Discuss the strength and weaknesses of static GAP analysis.

Attachment:- Bank Management Assignment File.rar