Chap 007
Chap 007
Chap 007
Problem 01
Input Area:
Today's price $1,195.00
Annual coupon payment $75.00
Time-to-maturity (years) 14.00
Redemption value $1,000.00
Output Area:
Yield to maturity 5.47%
Chapter 07
Problem 02
Input Area:
Today's price $1,150.00
Annual coupon payment $75.00
Time-to-maturity (years) 14.00
Holding period (years) 5.00
Redemption value $1,000.00
Sales price after 5 years $940.00
Output Area:
Annual yield for 5 year holding period 3.09%
Chapter 07
Problem 03
Input Area:
T-bill price* Maturity (days)
T-Bill 1 $97.25 182
T-Bill 2 $95.75 270
T-Bill 3 $98.75 91
Output Area:
Discount Bond-equivalent
rates yield
T-Bill 1 5.44% 5.67%
T-Bill 2 5.67% 6.00%
T-Bill 3 4.95% 5.08%
Chapter 07
Problem 04
Input Area:
Original scenario
Net interest margin 2.75%
Total interest revenue (millions) $95.00
Total interest costs (millions) $82.00
Rise in interest revenues 5.00%
Rise in interest costs and earning assets 9.00%
Alternative scenario
Rise in interest revenues 5.00%
Rise in interest costs and earning assets 9.00%
Output Area:
Original Alternative
scenario scenario
Net interest margin 2.75% 2.01%
Total interest revenue (millions) $95.00 $99.75
Total interest costs (millions) $82.00 $89.38
Earning assets $472.73 $515.27
Rise in interest revenues 5.00% 5.00%
Rise in interest costs and earning assets 9.00% 9.00%
Chapter 07
Problem 05
Input Area:
Original scenario
Net interest margin 2.50%
Total assets (millions) $575.00
Rise in nim 10.00%
Rise in total assets 20.00%
Output Area:
Original Alternative
scenario scenario
Net interest margin 2.50% 2.75%
Total assets (millions) $575.00 $690.00
Rise in nim 10.00%
Rise in total assets 20.00%
New net interest income (millions) $18.98
Chapter 07
Problem 06
Input Area:
Original
scenario
Cumulative interest gap $25.00
Market rates 3.00%
Rise in cig 60.00%
Change in market interest rates 25.00%
Output Area:
Alternative
scenario
Cumulative interest gap $40.00
New net interest income (millions) $0.30
Chapter 07
Problem 07
Input Area:
Current Year Previous Year Two Years Ago
Interest revenues 82.00 80.00 78.00
Interest expenses 64.00 66.00 68.00
Loans (Excluding nonperforming) 450.00 425.00 400.00
Investments 200.00 195.00 200.00
Total deposits 450.00 425.00 400.00
Money market borrowings 150.00 125.00 100.00
Output Area:
Current Year Previous Year Two Years Ago
Earning Assets 650.00 620.00 600.00
Net Interest Margin 2.77% 2.26% 1.67%
Chapter 07
Problem 08
Input Area:
Coming Next Next More Than
Week 30 Days 31-90 Days 90 Days
Loans $200.00 $300.00 $475.00 $525.00
Securities $21.00 $26.00 $40.00 $70.00
Transaction deposits $320.00 $0.00 $0.00 $0.00
Time Accounts $100.00 $290.00 $196.00 $100.00
Money market borrowings $136.00 $140.00 $100.00 $65.00
Output Area:
Coming Next Next More Than
Week 30 Days 31-90 Days 90 Days
Loans $200.00 $300.00 $460.00 $525.00
Securities $21.00 $26.00 $40.00 $70.00
Interest Sensitive Assets $221.00 $326.00 $500.00 $595.00
Input Area:
Interest-Sensitive Assets Rate Sensitivity
Amount Index
Federal fund loans $50.00 1.00
Security holdings $50.00 1.20
Loans and leases $350.00 1.45
Interest-Sensitive Liabilities
Interest-bearing deposits $250.00 0.75
Money-market borrowings $90.00 0.95
Output Area:
Rate Sensitivity
Interest-Sensitive Assets Amount Index wted $ Amt
Federal fund loans $50.00 1.00 50.00
Security holdings $50.00 1.20 60.00
Loans and leases $350.00 1.45 507.50
Total $450.00 $617.50
Rate Sensitivity
Interest-Sensitive Liabilities Amount Index wted $ Amt
Interest-bearing deposits $250.00 0.75 $187.50
Money-market borrowings $90.00 0.95 $85.50
Total $340.00 $273.00
Other
Interest-sensitive gap $110.00
Weighted interest-sensitive gap $344.50
Change in net income using isg $0.55
Change in net income using wisg $1.72
Chapter 07
Problem 10
Input Area:
Interest-sensitive assets (millions) $400.00
Interest-sensitive liabilities (millions) $325.00
Total assets $500.00
Output Area:
$ interest sensitive gap $75.00
Relative interest sensitive gap 0.15
Interest sensitive ratio 1.23
Chapter 07
Problems 11 & 12
PV of Expected
Liability Cash Flows Time CFs PV of Exp CFs * t
1 1,242,686 1,242,686
2 765,043 1,530,087
3 109,353 328,060
4 851 3,403
5 0 0
2,117,934 3,104,237
Input Area:
Part 1 Part 2
Average asset duration 7 7
Average liability duration 4 4
Total assets 1,800,000,000 1,800,000,000
Total liabilities 1,500,000,000 1,500,000,000
Initial interest rate 5.00% 5.00%
Interest rate after change 6.00% 4.50%
Output Area:
Part 1 Part 2
Change in interest rates 1.00% -0.50%
Change in net worth (62,857,143) 31,428,571
Chapter 07
Problem 14
Input Area:
Duration of bond 15
Current market price $975.00
Current market rate 6.00%
Expected market rate 5.75%
Output Area:
Expected change in market rate -0.25%
Percentage price change for bond 3.54%
Chapter 07
Problem 15
Input Area:
Average asset duration 8.00
Total assets (millions) $1,250.00
Total liabilities (millions) $925.00
Leverage adjusted duration 0.00
Output Area:
Average liability duration 10.8108
Chapter 07
Problem 16
Input Area:
Avg. Duration Dollar Amount
Asset and Liability Items (years) (millions)
Investment-grade bonds 15.00 $65.00
Commercial loans 3.00 $400.00
Consumer loans 7.00 $250.00
Deposits 1.25 $600.00
Nondeposit borrowings 0.50 $50.00
Output Area:
Total Earning Assets $715.00
Total Liabilities $650.00
Input Area:
Expected Cash Flows Time Cashflows
1 $100.00
2 $100.00
3 $100.00
4 $100.00
5 $1,100.00
Output Area:
PV of Expected
Expected Cashflows Time CFs PV of Exp CFs * t
1 $94.34 $94.34 $0.00
2 $89.00 $178.00 $0.00
3 $83.96 $251.89 $0.00
4 $79.21 $316.84 $0.00
5 $821.98 $4,109.92 $0.00
$1,168.49 $4,950.98 $0.00
Input Area:
Duration of bond portfolio 12.00
Current market rate 6.00%
Expected market rate 7.00%
Output Area:
Expected change in market rate 1.00%
Percentage price change for bond -11.32%