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What is expected dollar change in value of the bank equity

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Financial Management Assignment -

1. How does the income of a financial institution differ from that of a non-financial institution?

2. a. Explain how the information revealed by a bank's duration gap differs from that provided by its re-pricing gap.

b. A bank has assets with a total value of $14.380 billion; $14.250 billion of which are rate sensitive. The bank's liabilities total $14.110 billion; all are rate sensitive. If the average duration of its asset portfolio is 5.165 years and its liabilities have a 3.125-year average duration, what is the bank's duration gap?

c. What is the expected dollar change in the value of the bank's equity if the average interest rate increases from 3.30% to 3.65%?

d. What is the expected percentage change in the bank's equity?

3. For each of the following line items from a depository institution's balance sheet, indicate whether the line item refers to an asset and/or a liability.

a. Cash

b. Federal funds

c. Reserves

d. Commercial loan

e. Treasury bill

f. Repurchase agreement

g. Commercial paper

h. Deposits

i. Subordinated notes

j. Equity

4. a. Name two principal sources of revenue for a depository institution.

b. Name two principal expenses for a depository institution.

5. A bond portfolio has a market value of $7,225,000. Its duration is 6.64. If the average yield on the bond portfolio increases from 5.75% to 6.25%, what is the estimated effect on the value of the portfolio?

Reference no: EM132179274

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