REvision%20EXAM%202 - Financial Institutions Management...

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Financial Institutions Management Revision Exam 2 Task 1 Bank A has a $10,410,010 position in a five-year 8 percent coupon bond with a face value of 10,000,000. The bond is trading at a yield to maturity of 7.00 percent. The historical mean change in daily yields is 0.0 percent, and the standard deviation is 12 basis points. a.What is duration of the bond b. What is the maximum adverse daily yield move given that we desire no more than a 5 percent chance that yield changes will be greater than this maximum? c.What is the price volatility of this bond? d. What is the daily earnings at risk for this bond? Task 2 Bank of Alaska’s stock portfolio has a market value of $10 million. The beta of the portfolio is equal to 1.3, Standard deviation of market portfolio ( σ m) has been estimated at 1.5 percent. What is the 5-day VAR of this portfolio, using adverse rate changes in the 99th percentile? Task 3
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REvision%20EXAM%202 - Financial Institutions Management...

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