User Account

All Pages

What is the maturity gap of this balance sheet

Assignment Help Macroeconomics
Reference no: EM13317511

EDF Bank has a very simple balance sheet. Assets consist of a two-year, $1 million loan that pays an interest rate of LIBOR plus 4 percent annually. The loan is funded with a two-year deposit on which the bank pays LIBOR plus 3.5 percent interest annually. LIBOR currently is 4 percent, and both the loan and the deposit principal will be paid at maturity.

a. What is the maturity gap of this balance sheet?

b. What is the expected net interest income in year 1 and year 2?

c. Immediately prior to the beginning of year 2, LIBOR rates increase to 6 percent. What is the expected net interest income in year 2? What would be the effect on net interest income of a 2 percent decrease in LIBOR?

Reference no: EM13317511

Questions Cloud

What does the market expect the one-year treasury rate to be : The Wall Street Journal reports that the rate on three-year Treasury securities is 5.60 percent and the rate on four-year Treasury securities is 5.65 percent. According to the unbiased expectations hypothesis
Is there any real harm done by coping software : Would you report a co-worker if you discovered software coping?
What are the expected one-year rates for years : A recent edition of The Wall Street Journal reported interest rates of 6 percent, 6.35 percent, 6.65 percent, and 6.75 percent for three-year, four-year, five-year
Plot the resulting yield curve : Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Plot the resulting yield curve.
What is the maturity gap of this balance sheet : Immediately prior to the beginning of year 2, LIBOR rates increase to 6 percent. What is the expected net interest income in year 2? What would be the effect on net interest income of a 2 percent decrease in LIBOR?
What is the expected net interest income at the end of the : Scandia Bank has issued a one-year, $1 million CD paying 5.75 percent to fund a one-year loan paying an interest rate of 6 percent. The principal of the loan will be paid in two installments: $500,000 in six months and the balance at the end of the y..
What should be the current rate for a two-year treasury : The current one-year Treasury bill rate is 5.2 percent, and the expected one year rate 12 months from now is 5.8 percent. According to the unbiased expectations theory
Explain the changes in the maturity values if the yields : Explain the changes in the maturity values if the yields increase 1 percent. Assume that the insurance company has no other assets. What will be the effect on the market value of the company’s equity if the interest rate changes in (b) and (c) occur?
Write a concise and meaningful response : European Russia AND Moscow! Moscow - compare the two capitals looking at how they were/are different and same.

Reviews

Write a Review

Macroeconomics Questions & Answers

  Illustrate when banks would be willing to maintain services

From California to New York, legislative bodies acrosso the United States are considering eliminating or reducing the surcharges that banks imppse on non customers who make $10million in qirhseQloa deo orhwe banks' ATM machines.

  How many would you expect to have more than 2 imperfections

1) What is the probability that a microprocessor will have 0 imperfections 2) What is the probability that a microprocessor will have more than 2 imperfections 3) Out of the 100 microprocessors on the sheet, how many would you expect to have more tha..

  What is the rate of return on investment

Shelly s assets include money in the checking and savings accounts, investments in stocks and mutual funds, personal property, such as furniture, appliances, an automobile, coin collection and jewelry. Shelly calculates that her total assets are $108..

  Describe the output level of the firm

Describe the output level of the firm, the number of workers it employs and the profit of the firm.

  Describe the point elasticity of demand

Describe the point elasticity of demand with respect to advertisement

  Decide what sports were like nfl

Decide what sports were like NFL before the introduction of the salary cap?

  Calculate the annual worth of merchant truckingcompany cash

Calculate the annual worth (years 1 through 7) of Merchant TruckingCompany's cash flow. Use an interest rate of 10% peryear. Year 0 1 2 3 4 5 6 7  Cash Flow, $ millions 450 -40 200 200 200 200 200 200

  What is the difference in marketing strategy

Pick two similar small businesses in the same industry with which you are familiar, one successful and one not so successful. Describe them in a post, and compare and contrast these businesses. What is the difference in management style between the..

  Compar the effect of the increase in the cost of material

Starting anew from the equilibrium in part a., suppose that the cost of raw material used in the production of this good increases (assume nothing else has changed). Draw a diagram comparing the effect of the increase in the cost of materials in t..

  Find the preference volume for each location

John Bros, owner of a spark plug manufacturing facility, is looking to expand his production capacity. He is considering three locations A, B, and C for the constructing of a new plant. The company wishes to find the most economical location for a..

  Structure of the current income tax system

There is always debate regarding the structure of current income tax system in United State Many opponents of the current system argue that under its current structure,

  Explain how does the distinction among nominal and real

Explain how does the distinction among nominal and real interest rates add uncertainty to the effect of monetary policy on the economy.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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