Calculate the duration of the bank bond

Assignment Help Financial Management

Reference no: EM132039792

Suppose the First National Bank of Duluth has $500.00 million in total assets with an average asset duration of five years. Assume that the bank’s liabilities are comprised of $86.75 million of demand deposits and $163.75 million in bonds with a 4.00% coupon rate (which pays annually) and a five year time-to-maturity. Further assume that current market interest rates are at 9.00% per annum. Show work.

(a) Calculate the duration of the bank’s bonds.

(b) What is this bank’s duration gap? Is the bank asset- or liability-sensitive?

Reference no: EM132039792

Questions Cloud

Buying an airplane and then lease it to delta air lines : You work as a financial analyst for RBC. Your company is considering buying an airplane and then lease it to Delta Air Lines.

Describe the business functions within that organization : Describe the business functions within that organization where most outsourcing takes place.

How the author techniques produce your response : Line by line, stanza by stanza...you explain each part as fully as you can and show how the author's techniques produce your response.

Calculus and statistics in the samesemester : At a large university, the probability that a student takes Calculus and Statistics in the samesemester is 0.0125.

Calculate the duration of the bank bond : Calculate the duration of the bank’s bonds. What is this bank’s duration gap. Is the bank asset- or liability-sensitive?

Find intersection of two random variables : Clear, clc% I will like to find intersection of two random variables.%Supose A and B below are stocks.Please use MATLAB%

Variable selection with the gss data explorer : In this lab, you will use the GSS Data Explorer to guide your selection of predictor and outcome variables of interest to you (from within the GSS Datasets).

How can broadcast television change to remain competitive : How can broadcast television change to remain competitive and can you cite any examples of programming changes that they have made to do so already

What is the system failure rate : A system requires the use of 26 units of this component and all the components must function for the system to work. What is the system failure rate?

User Account

All Pages