Sample test questions for Test 2 FINA 465 2011 revised

Sample test questions for Test 2 FINA 465 2011 revised -...

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Sample test questions for Test 2, FINA 465 Chapter 8 1) If interest rates decrease 50 basis points for an FI that has a gap of $5 million, what is the expected change in net interest income? $5M * (-.005) = -$25,000 2) If interest rates decrease 40 basis points (0.40 percent) for an FI that has a cumulative gap of -$25 million, what is the expected change in net interest income? -$25M *(-.004) = +$100,000 The next 2 questions refer to the following information. Assets Rate Liabilities Rate Rate Sensitive Rate Sensitive $35,000,000 10 percent $40,000,000 8 percent Fixed Rate Fixed Rate $21,000,000 9 percent $12,000,000 7 percent Non-earning Equity $4,000,000 $8,000,000 3) What is the repricing gap for the FI? $35,000,000 - $40,000,000 = -$5,000,000 4) Suppose short-term interest rates increase by 1 percent. Calculate the change in net interest income after the interest rate increase. -$5M*.01= -$50,000
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Chapter 9 Use the following information to answer the next 4 questions. A bond is scheduled to mature in two years. Its coupon rate is 9 percent with interest paid annually. This $1,000 par value bond carries a yield to maturity of 10 percent. 5) What is the bond's price? ($90 / 1.1) + ($1,090 / 1.1^2) = $982.64 6) What is the duration of the bond? [($90*1 / 1.1) + ($1,090*2 / 1.1^2)] / $982.64 = 1.917 years 7) Calculate the percentage change in this bond's price if interest rates on comparable risk securities decline to 7 percent. -1.917 * (-.03 / 1.1) = 5.23% 8) Calculate the percentage change in this bond's price if interest rates on comparable risk securities increase to 11 percent. -1.917 * (.01 / 1.1) = -1.74%
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This note was uploaded on 07/02/2011 for the course FINA 465 taught by Professor Berger during the Spring '11 term at South Carolina.

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Sample test questions for Test 2 FINA 465 2011 revised -...

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