FIN%204620%20Case

FIN%204620%20Case - FIN 4620 - Case Study Spring 2012 You...

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FIN 4620 - Case Study Spring 2012 You may submit the case on an interim basis on the dates indicated on the syllabus. It will be graded as you proceed. The grade will not be adjusted for any previously graded work, but will assist with work not yet submitted and test preparation. THIS CASE IS TO BE COMPLETED INDIVIDUALLY. Professional work is expected. A bank’s balance sheet follows. It is based on book values. All line items carry fixed rates. The average maturity of all line items is displayed and the duration of some is provided. 2-month T-Bills (interest paid at maturity; M=D) $500,000 6-month CDs (interest paid at maturity; M=D) $5,000,000 7-month T-Bills (interest paid at maturity; M=D) $375,000 2-year Capital Notes $1,750,000 4-year T-Bonds $1,000,000 Total Liabilities $6,750,000 3-year Consumer Loans (D = 2.76 years) $2,500,000 Tier I Capital $625,000 7 1/2-year Commercial Loans (D = 6.48 years) $4,000,000 Tier II Capital $1,000,000 Total Assets $8,375,000 $8,375,000 Assets 1. Using the Repricing Model, place the RSAs and RSLs in the following maturity windows and determine the GAP for each planning period as well as the CGAP. Assets Liabilities Gap Cumulative Gap > 1 Day - 3 Months > 3 Months - 1 Year > 1 Year - 5 Years > 5 Years Total 2. Assuming the bank is planning for the 1-year or less maturity window, what is the repricing gap? 3. Is the bank short-funded or long-funded in the 1-year or less maturity window? To what type of type of interest rate risk is the bank exposed (reinvestment or refinance)? Why? Row CGAP ∆ in Rates ∆ in NII ∆ in Int Rev ∆ in Int Exp 1 Positive > 2 Positive > 3 Negative < 4 Negative < 4. If interest rates increase by 62 bps equally for both RSA and RSL, what would be the impact
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on net interest income for the 1-year or less maturity window? ∆NII
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This note was uploaded on 01/26/2012 for the course FIN 4620 taught by Professor Patriciarobertson during the Spring '12 term at Kennesaw.

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FIN%204620%20Case - FIN 4620 - Case Study Spring 2012 You...

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