QUESTION 5 Suppose a bank has $100 million in assets, $80 million in liabilities (excluding Bank Capital), and $20 milli

[answerhappygod]

Question 5 Suppose A Bank Has 100 Million In Assets 80 Million In Liabilities Excluding Bank Capital And 20 Milli 1 (137 KiB) Viewed 29 times

QUESTION 5 Suppose a bank has $100 million in assets, $80 million in liabilities (excluding Bank Capital), and $20 million in Bank Capital. The average duration of assets 3.5 years, and the average duration of liabilities = 4 years. Use the duration analysis to evaluate the Bank's exposure to interest rate risk when interest rate RISES from 3% to 5% (i.e. change in i = 2% points). ANSWER THE FOLLOWING QUESTIONS: a.[2.5 points] What is the impact of the change in interest rate (rise from 3% to 5%) on the bank's assets? Obtain the % impact and the impact in *dollars* as well. SHOW ALL WORK. b. [2.5 points] What is the impact of the change in interest rate (rise from 3% to 5%) on the bank's liabilities? Obtain the % impact and the impact in *dollars* as well. SHOW ALL WORK. c. [2 points] What is the overall impact in dollars? Show calculations and interpret your findings.