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Question 4
(30 marks)
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Consider the following balance sheet of Gamma Bank.
Minimum 10 characters are
Assets
Liabilities
Amount in min
Amount Duration Duration in years
Amount
Duration
required.
Money Market short term
Fixed rate mortgage loans
1,600
deposits ( variable rates)
2,000
1.3
Variable rate mortgage
loans
1,400
8.1
Saving accounts deposits
3,500
2.3
Search for a subject.
Commercial loans
(indexed on Libor)
5,000
3.2
Variable rate CDs
1,000
1.2
. . .
Buildings and equipment
2,000
Equity
3,500
Total
10,000
Total
10,000
More
a) Using basic gap analysis, calculate the change in Gamma Bank's net interest
income if interest rates are forecast to increase by 0.5%, from 3% to 3.5%.
Answers in as fast as 15
Make the following assumptions on the runoff of cash flows:
minutes
o fixed-rate mortgages repaid during the year: 10%
o proportion of savings deposits and variable-rate CD that are rate-sensitive:
20 %.
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b) Calculate the duration gap for Gamma Bank and the impact (in Dollars) on the
networth of the bank if rates move up from 3% to 3.5%
c) Explain how Gamma Bank could decrease its duration gap.
(10 + 10 + 10 = 30 marks)
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11:38 PM
2/11/2020

Dear, 1.you need to calculate interest if interest rates increased from 3% to 3.5% and there are two types of mortgages... View the full answer

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